National civilized city award and corporate earnings management

Using China's civilized city selection campaign from 2005 to 2019 as a quasi-natural experiment, this study examines the impact of National Civilized City Award (NCCA) on corporate earnings management. We find that NCCA significantly exacerbates the earnings management of local firms. Mechanism tests indicate that political performance pressure and operational pressure on the firms amplify the positive relationship between NCCA and corporate earnings management. Heterogeneity analysis reveals that this relationship is particularly pronounced among non-state-owned firms, those subjected to weaker media supervision, and those lack of government subsidies. Additionally, further analysis shows that NCCA leads to an increase in the tax burden for corporations. This study contributes to the understanding of the economic implications associated with NCCA and provides empirical insights for enhancing urban development policies.