DUFE • Accounting and Finance Forum (Issue 25, 2023): Shanshan Zhang

Topic: State-owned enterprises’ discretionary consolidation under principle-based accounting standards

Speaker: Shanshan Zhang

Date & Time: 13:30-15:00 Friday, November 24, 2023

Venue: Room 245, Quan Xue Building

Organizers: School of Accounting, Dongbei University of Finance and Economics, P.R. China & Liaoning Capital Market Finance and Accounting Graduate Innovation and Academic Exchange Center



In response to firms’ tendency to hide losses and risk in unconsolidated subsidiaries, standard setters have continuously widened the scope of consolidation by introducing the concept of de facto control and eliminating consolidation exemptions in history. However, we argue that in firms where managers have strong empire-building incentives, such as Chinese state-owned enterprises (SOEs), the consolidation incentives can be totally different. We find that Chinese SOEs show a higher propensity to consolidate their non-wholly owned investees than non-SOEs that hold equal shares in these investees. SOEs are expected to fulfill nonprofitable obligations for the good of social welfare and thus are provided with more size-related incentives. Consistently, we find that SOEs’ preference for consolidation increases with the extent to which the group assets or group revenue can increase after the consolidation, with SOEs’ incentives to expand firm size, and with the extent that SOE executives care about their performance evaluation. Our results add to the literature on how state ownership affects firms’ financial reporting incentives, and also provide references for standard setters’ further revision of the criteria for defining reporting entities’ boundaries.


Introduction of Speaker:

Shanshan Zhang, Associate Professor and Director of Department of Accounting of School of Economics and Management at Beijing Jiaotong University, has received her Bachelor's, Master's and Doctoral degrees from Department of Accounting of Renmin University of China, and has been a visiting scholar in Department of Accounting of Business School at Columbia University. She was selected for the Ministry of Finance's High-level Accounting Talent Program and was nominated by PricewaterhouseCoopers 3535. She was selected for the High-Level Finance and Accounting Talent Program of the Ministry of Finance and nominated for PwC 3535. Her research interests include accounting standards, auditing. She presided over the Youth and General Projects of the National Natural Science Foundation of China, and participated in the Major Projects of the National Social Science Fund of China and several other national projects as the main participant. She undertook the translation and introduction of US GAAP and IFRS, and published translations such as The History of International Accounting Standards. More than ten papers have been published in Auditing: A Journal of Practice & Theory, Journal of Corporate Finance and China Economic Quarterly, Accounting Research.


Special Attention:

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