Investment in China and Earnings Quality

The thesis would like to examine the association between investments in China and earnings quality and whether the upper limit on investment in China set by Taiwanese government can alleviate earnings management. argue that Taiwanese firms investing in China will increase opaque and information asymmetry because of the political tensions between China and Taiwan and those firms are likely to have higher discretionary accruals and lower earnings quality. I also hypothesize that the regulation of upper limit on the amount of investment in China by Taiwanese government can mitigate the negative relationship between earnings quality and investment in china.Consistent with my hypothesis, I find that the intensity of investment in China is negatively related to earnings quality. I also find that the upper limit on investment in China mitigate the negative association between investment in China and earnings quality.