Merchant guild culture and real earnings management: evidence from China.

Merchant guild culture is one of the most important traditional cultures, and it has had a profound impact on the economics of China. This paper explores the influence of merchant guild culture on real earnings management (REM). Using hand-collected data, we find robust evidence that merchant guild culture has a negative effect on REM. This effect operates through improving integrity and easing financing constraints. The negative effect is larger for state-owned firms, firms with appropriate internal controls, and firms with high analyst attention. On the whole, the study complements the existing literature by illustrating how traditional culture affects REM. [ABSTRACT FROM AUTHOR]