Does information infrastructure curb corporate R&D manipulation? Evidence from China

This paper examines the impact of information infrastructure on corporate R&D manipulation. We exploit the staggered rollout of broadband infrastructure in 117 cities under the Broadband China strategy (BCS) as an exogenous positive shock. On a sample of Chinese listed firms from 2010 to 2019, our difference-in-differences results find a significant reduction in R&D manipulation for firms in BCS-pilot cities following the policy implementation. Cross-sectional tests show that the effect of the BCS on R&D manipulation is more pronounced in non-state-owned enterprises, smaller firms, and firms with low coverages of analysts or media. Mechanism analyses indicate that the decline can be attributed to attenuated information asymmetry and eased financial constraints.