IMPACT OF COVID-19 ON FINANCIAL REPORTING QUALITY IN CHINA: THE MODERATING ROLE OF CORPORATE GOVERNANCE

In the extant literature, there are limited studies on the impact of the COVID-19 pandemic on corporate financial reporting quality (FRQ), and no systematic conclusions have been drawn. This paper conducts an empirical study on how COVID-19 affects corporate FRQ and whether corporate governance plays a moderating role in the COVID-19 pandemic affecting corporate FRQ. Using China's A-share listed companies from 2010 to 2022 as sample data, the corporate FRQ is measured by real surplus management (REM) as the dependent variable, and corporate governance indicators are constructed using principal component analysis (PCA) to measure the level of corporate governance. The results show that there is a significant negative correlation between COVID-19 and REM. In addition, corporate governance can strengthen the negative effect of COVID-19 on REM, implying that a high level of corporate governance can lead to a lower level of REM thus a higher corporate FRQ. The research findings have implications for both companies and government policymakers in coping with major crises such as COVID-19.