Data Assets in Governance: Evidence From Real Earnings Management

ABSTRACT This study examines the impact of data assets on corporate real earnings management (REM) by analysing a sample of Chinese listed firms for 2003–2021. We find that firms with data assets have a lower level of REM than firms without, as data exploitation significantly improves internal governance. This effect is greater for firms with higher earnings pressure and more powerful CEOs. Furthermore, data assets reduce abnormal increases in production costs and abnormal cuts in discretionary expenses. Thus, data assets may be a novel governance mechanism for curbing managerial opportunism, indicating a practical use for data assets in corporate governance.