| 简介： | Using provincial-level corruption data in China, we examine the relation between local political corruption and firms’ financial reporting conservatism. We find that firms in more corrupt regions report more conservatively. Namely, they are more likely to speed recognition of bad news and slow recognition of good news in reported earnings relative to firms in less corrupt regions. Similar results are obtained when we use the recent anti-corruption campaign in China as a quasi-natural experiment. Further analysis reveals that the positive effect of local corruption on reporting conservatism is stronger when firms are more likely to be expropriated by corrupt officials. Collectively, these findings suggest that through adopting more conservative financial reporting policies, firms manage earnings and net worth downward to shield their business from expropriation by corrupt local officials. |