The Impact of Investor Sentiment on Earnings Management and Financial Disclosure Behavior: Evidence from China’s A-Share Market

Purpose: To evaluate whether investor sentiment influences voluntary disclosure and earnings-management decisions of Chinese A-share firms. Methods: Using industry-adjusted Tobin's Q as a firm-level valuation pressure or sentiment proxy, based on 14,081 firm-years of data from Chinese A-share-listed companies between 2013 and 2023. The measurement of earnings management is centered on performance-related fit indicators. Results: When sentiment is high, profitable firms tend to report more positive earnings and issue disclosures more frequently, compared to loss-making firms. Conclusion: Overall, evidence indicates that the Chinese A-share market tends to exhibit behavioral fluctuations in response to investors' emotional sentiments.