A Social Norm Perspective on Distorted Information in China
Zhe Li, Massimo Massa, Nianhang Xu, Hong Zhang · Journal of Financial and Quantitative Analysis · 2025
Abstract Can social norms give rise to distorted information in China? We observe that China’s leading social norm related to alcohol consumption and social drinking enhances earnings management. An analysis of toxic alcohol scandals supports a causal interpretation. Further evidence suggests that the influence of alcohol may come from the negative externality that it creates, which is propagated by corporate leaders and cannot be attenuated by market-oriented institutions. Our results reveal a social norm externality that may have important normative implications.