Discussion of "Regulatory Incentives for Earnings Management through Asset Impairment Reversals in China"

Shimin Chen, Yuetang Wang, and Ziye Zhao (2009) examine motivations for managers of Chinese-listed firms to report asset impairment reversals. The study documents that the reporting of such reversals reflects incentives to avoid delisting from Chinese stock exchanges and that stronger monitoring mechanisms attenuate this opportunistic reporting. The study exploits a unique feature of financial reporting within China, which allows large sample investigation of impairment reversals. I discuss the study's strengths, note some limitations on the analyses and inferences, and suggest recommendations for future research.