The effects of financial market shocks on revenue–expense matching: The case of Chinese companies

This study aims to analyze the trends of Chinese companies' revenue–expense matching level and identify the impacts of the 2008 global financial crisis and the 2015 plunge in the Shanghai index on this level of matching. Since these two events, China has implemented strong regulations in the form of structural changes in financial markets and the application of accounting standards. The analysis results can be summarized as follows: first, the analysis of samples for all firm years showed that the expenses of t-1, t, and t+1 had significant positive effects on current revenue. In particular, as concluded by prior studies, the current (t) expenses had the greatest impact on current revenue. Second, before and after the 2008 financial crisis, this matching level changed, but was not statistically significant. However, prior to the 2008 financial crisis and after the 2015 stock price crash, prior and current expenses showed statistically significant coefficients with regard to current revenues. This study provides accounting policy implications as an analysis of the impact of changes in accounting policies due to macroeconomic events in China on the level of revenue–expense matching.