The effect of the industrial networks within business groups on the quality of accounting information: evidence from China

ABSTRACT

We construct the parent-subsidiary industrial network within listed business groups in China. The results show that the higher the density of parent-subsidiary industrial network, the lower the quality of accounting information of listed companies. The more the parent company is in the centre of the industrial network, the higher the quality of accounting information of the listed company is. Geographical diversification of subsidiaries will intensify the adverse impact of industrial network density on the accounting information quality, and will restrain the parent-subsidiary industrial network governance effect in terms of the centrality of the listed parent company’s industrial network. Based on agency theory and the empirical results of our research, it can be inferred that the parent-subsidiary relationship in the accounting information manipulation of listed business groups is more inclined to a parent company’s supervision of its subsidiaries rather than the ‘collusion’ manipulation of the parent-subsidiary companies.

JEL CLASSIFICATION:

• Industrial network
• accounting information quality
• business group
• geographical diversification

JEL CLASSIFICATION:

• G30
• M41

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

The work was supported by the National Natural Science Foundation of China [71772156,72102014]; Humanities and Social Science Research Project of the Ministry of Education of China [20YJC630225].