When Stock Prices Become Targets: Earnings Management and Price Informativeness in China (opens in new tab)

China’s stock market appears to predict future corporate earnings, but this predictability does not necessarily mean prices are a clean “crystal ball” for fundamentals. High valuations also appear to pressure firms to cater to investor expectations by inflating reported earnings, especially through non-recurring gains and losses. The result is a distinctive pattern: short-run earnings predictability […]