ABSTRACT
Since becoming a member of the World Trade Organization in 2001, China has shown considerable movement toward a market-based approach to corporate reporting, auditing and corporate governance in its listed companies. At the same time, it has retained distinctive characteristics that create unique opportunities for academic research. Institutions remain under ultimate control of the Chinese Communist Party through government mechanisms. Market socialism maintains political control while adapting the economic system to accommodate global interests. Convergence with International Financial Reporting Standards (IFRS Standards) has been achieved through the Accounting Standards for Business Enterprises (ASBEs), with some differences remaining to recognise characteristics of China’s transforming market economy. The corporate reporting framework is based on a hierarchy of laws and regulations. The corporate governance code includes some features that would be expected from Organisation for Economic Co-operation and Development (OECD) guidance but also acknowledges state involvement. Hong Kong has separate institutions to regulate accounting and stock exchange activity under the ‘one country, two systems’ policy. Research design based on Chinese data is able to take advantage of unique features of the corporate reporting practices and the institutional context.
