Study On The Impact Of The Implementation Of The New Revenue Standard On The Earnings Persistence Of Firms

The new revenue standard was amended and issued by the Ministry of Finance in July 2017 and was first implemented by "A+H" companies listed on both domestic and overseas stock markets starting from January 1,2018,domestic A-share companies begin to implement in 2020.The new revenue standard follows the principle of "transfer of control right" and is based on the rights and obligations of both parties to the contract to recognize and measure revenue.On the one hand,it establishes a clear relationship of rights and obligations between enterprises and customers,it is possible to improve earnings persistence by clarifying the obligations of both parties and standardizing the criteria and procedures for revenue recognition.On the other hand,the new revenue standard gives enterprises more professional judgment and lack guidance for different businesses,it may lead to subjective bias or earnings manipulation,thus reducing earnings persistence.Therefore,studying the impact of the implementation of the new revenue standard on earnings persistence will not only help to evaluate the effect of the implementation of the new revenue standard,it is also of great significance to expand the literature on the economic consequences of the implementation of the new revenue standard and the influencing factors of enterprise earnings quality.Exploiting the setting that “A+H” share companies take the lead in implementing new revenue standard,this paper employs the financial data of listed companies from2016 to 2018,and uses “A+H” companies which have implemented new revenue standard as the treat group,and other A-share companies which have not implemented new revenue standard during the same period as the control group.This paper examines the effect of new revenue standard on earnings persistence by means of propensity score matching(PSM)and difference-in-difference(DID).The study finds that the implementation of new revenue standard will result in a significant decrease in the persistence of accruals caused by the changes in accounts receivable and contract assets.Further research finds that this effect is mainly manifested in companies with higher financing constraints and executive compensation,and lower large shareholder checks and balances and institutional investor ownership.This suggests that the persistent decline in earnings as a result of new revenue standard may be related to opportunistic motives of management.Finally,we find that the impact of new revenue standard on earnings persistence leads to a negative market reaction.The research findings not only reveal the mechanism and economic consequences of the impact of new revenue standard on the earnings quality of companies,enrich the literature on the effectiveness of the implementation of international accounting standards in emerging economies.but also have a good reference value for the accounting standard-making department and capital market regulators in the initial stage of the implementation of new revenue standard.