nach oben

Review of Quantitative Finance and Accounting

Erschienen in:

21.07.2016 | Original Research

Institutional ownership stability and real earnings management

verfasst von: Hamid Sakaki, Dave Jackson, Surendranath Jory

Erschienen in: Review of Quantitative Finance and Accounting | Ausgabe 1/2017

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

We examine the relationship between institutional ownership stability and real earnings management. Our findings indicate that firms held by more stable institutional owners experience lower real activities manipulation by limiting overproduction. We further examine how the stability in the shareholdings of pressure-sensitive and insensitive institutional investors affect target firms’ use of real earnings management, respectively. Unlike pressure-sensitive institutional investors, the stability in the share ownership of pressure-insensitive institutional investors (i.e., investment advisors, pension funds and endowments) mitigates target firms’ use of real earnings management. Overall, our results are consistent with the view that institutional investors presence acts as a monitor on target firms’ use of real earnings manipulation activities.

Vorheriger Artikel Is the accuracy of stock value forecasting relevant to industry factors or firm-specific factors? An empirical study of the Ohlson model

Nächster Artikel Modelling optimal asset allocation when households experience health shocks

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

FASB No. 14 and SEC Regulation S-K require firms to report information on segments whose sales, assets, or profits exceed 10 % of the consolidated totals.

Industry is defined based on the Fama and French 48-sector industry classification.

All earnings management variables are winsorized at the 1 % level to alleviate the impact of extreme observations.

Marginal tax rates retrieved from Dr. John Graham home page: https://faculty.fuqua.duke.edu/~jgraham/.

Source: http://www.accaglobal.com/gb/en/discover/ab-articles/audit-assurance/problem-rotation.html.

Almazan A, Hartzell J, Starks LT (2005) Active institutional shareholders and cost of monitoring: evidence from managerial compensation. Financ Manage 34:5–34CrossRef

Black A, Davies J, Wright PD (1998, 2001) In search of shareholder value: managing the drivers of performance, 2nd edn [1998 (1st edn), 2001 (2nd edn)]. Financial Times Prentice Hall. ISBN: 9780273650836, 0273650831

Blume ME, Keim DB (2012) Institutional investors and stock market liquidity: trends and relationships. Available at SSRN 2147757

Brickley J, Lease R, Smith C (1988) Ownership structure and voting on antitakeover amendments. J Financ Econ 20:267–292CrossRef

Bushee BJ (1998) The influence of institutional investors on myopic R&D investment behavior. Account Rev 73:19–45

Bushee BJ (2001) Do institutional investors prefer near-term earnings over long-run value? Contemp Account Res 18(2):207–246CrossRef

Chen X, Harford J, Li K (2007) Monitoring: which institutions matter? J Financ Econ 86:279–305CrossRef

Chin CL, Chen YJ, Hsieh TJ (2009) International diversification, ownership structure, legal origin, and earnings management: evidence from Taiwan. J Account Audit Finance 24(2):233–262

Chung R, Firth M, Kim JB (2002) Institutional monitoring and opportunistic earnings management. J Corp Finance 8:29–48CrossRef

Chung R, Firth M, Kim JB (2005) Earnings management, surplus free cash flow, and external monitoring. J Bus Res 58(6):766–776CrossRef

Clifford CP (2008) Value creation or destruction? Hedge funds as shareholder activists. J Corp Finance 14(4):323–336CrossRef

Cohen DA, Zarowin P (2010) Accrual-based and real earnings management activities around seasoned equity offerings. J Account Econ 50(1):2–19CrossRef

Cohen DA, Dey A, Lys TZ (2008) Real and accrual-based earnings management in the pre- and post-Sarbanes–Oxley periods. Account Rev 83:757–787CrossRef

Cornett MM, Marcus AJ, Saunders A, Tehranian H (2007) The impact of institutional ownership on corporate operating performance. J Bank Finance 31(6):1771–1794CrossRef

Dechow PM (1994) Accounting earnings and cash flows as measures of firm performance: the role of accounting accruals. J Account Econ 18(1):3–42CrossRef

Dechow PM, Ge W, Larson CR, Sloan RG (2011) Predicting material accounting misstatements*. Contemp Account Res 28(1):17–82CrossRef

Elyasiani E, Jia JJ (2008) Institutional ownership stability and BHC performance. J Bank Finance 32(9):1767–1781CrossRef

Elyasiani E, Jia JJ, Mao CX (2010) Institutional ownership stability and the cost of debt. J Financ Markets 13(4):475–500CrossRef

Farooq O, El Jai H (2012) Ownership structure and earnings management: evidence from the Casablanca stock exchange. Int Res J Finance Econ 84:95–105

Farooqi J, Harris O, Ngo T (2014) Corporate diversification, real activities manipulation, and firm value. J Multinatl Financ Manag 27:130–151CrossRef

Farooqi J, Jory S, Ngo T (2015) Institutional investors’ activism and credit ratings. J Econ Finance 39(3):1–27

Gaspar JM, Massa M, Matos P (2005) Shareholder investment horizons and the market for corporate control. J Financ Econ 76:135–165CrossRef

Ge W, Kim JB (2014) Boards, takeover protection, and real earnings management. Rev Quant Financ Acc 43(4):651–682CrossRef

Gillan SL, Starks LT (2007) The evolution of shareholder activism in the United States. J Appl Corp Finance 19(1):2007CrossRef

Graham JR (1996a) Debt and the marginal tax rate. J Financ Econ 41(1):41–73CrossRef

Graham JR (1996b) Proxies for the corporate marginal tax rate. J Financ Econ 42(2):187–221CrossRef

Graham JR, Mills LF (2008) Using tax return data to simulate corporate marginal tax rates. J Account Econ 46(2):366–388CrossRef

Graham J, Harvey C, Rajgopal S (2005) The economic implications of corporate financial reporting. J Account Econ 40:3–73CrossRef

Guercio Del (1996) The distorting effect of the prudent-man laws on institutional equity investment. J Financ Econ 40:31–62CrossRef

Hadani M, Goranova M, Khan R (2011) Institutional investors, shareholder activism, and earnings management. J Bus Res 64(12):1352–1360CrossRef

Harris MS (1998) The association between competition and managers’ business segment reporting decisions. J Account Res 36(1):111–128CrossRef

Jafarinejad M, Jory SR, Ngo TN (2015) The effects of institutional ownership on the value and risk of diversified firms. Int Rev Financ Anal 40:207–219CrossRef

Jiraporn P, Kim YS, Davidson WN, Singh M (2006) Corporate governance, shareholder rights and firm diversification: an empirical analysis. J Bank Finance 30(3):947–963CrossRef

Karpoff J (2001) Does shareholder activism work? A survey of empirical findings. Unpublished working paper, University of Washington, Seattle, WA

Koh S (2007) Institutional investor type, earnings management and benchmark beaters. J Account Public Policy 26:267–299CrossRef

Lin L, Manowan P (2012) Institutional ownership composition and earnings management. Rev Pac Basin Finan Mark Policies 15(04):1250022CrossRef

Lin F, Wu CM, Fang TY, Wun JC (2014) The relations among accounting conservatism, institutional investors and earnings manipulation. Econ Model 37:164–174CrossRef

McNichols MF (2001) Research design issues in earnings management studies. J Account Public Policy 19(4):313–345

Mitra S, Cready W (2005) Institutional stock ownership, accrual management, and information environment. J Account Audit Finance 20:257–286CrossRef

Mohd N, Ahmed K (2005) Earnings management of distressed firms during debt renegotiation. Account Bus Res 35(1):69–86CrossRef

Othman HB, Zeghal D (2006) A study of earnings-management motives in the Anglo-American and Euro-Continental accounting models: the Canadian and French cases. Int J Account 41(4):406–435CrossRef

Pound J (1988) Proxy contests and the efficiency of shareholder oversight. J Financ Econ 20:237–265CrossRef

Rajgopal S, Venkatachalam M, Jiambalvo JJ (1999) Is institutional ownership associated with earnings management and the extent to which stock prices reflect future earnings? Available at SSRN 163433

Romano R (2001) Making institutional investor activism a valuable mechanism of corporate governance. Yale J Regul 18:174–251

Roychowdhury S (2006) Earnings management through real activities manipulation. J Account Econ 42:335–370CrossRef

Roychowdhury S, Watts RL (2007) Asymmetric timeliness of earnings, market-to-book and conservatism in financial reporting. J Account Econ 44(1):2–31CrossRef

Walker M (2013) How far can we trust earnings numbers? What research tells us about earnings management. Account Bus Res 43:445–481CrossRef

Woidtke T (2002) Agents watching agents? Evidence from pension fund ownership and firm value. J Financ Econ 63:99–131CrossRef

Yan X, Zhang Z (2009) Institutional investors and equity returns: are short-term institutions better informed? Rev Financ Stud 22(2):893–924CrossRef

Zang AY (2012) Evidence on the trade-off between real activities manipulation and accrual-based earnings management. Account Rev 87:675–703CrossRef

Zhu X, Lu S (2013) Earnings management through real activities manipulation before mergers and acquisitions. J Finance Account 13:1

Titel: Institutional ownership stability and real earnings management
verfasst von: Hamid Sakaki
Dave Jackson
Surendranath Jory
Publikationsdatum: 21.07.2016
Verlag: Springer US
Erschienen in: Review of Quantitative Finance and Accounting / Ausgabe 1/2017
Print ISSN: 0924-865X
Elektronische ISSN: 1573-7179
DOI: https://doi.org/10.1007/s11156-016-0588-7

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Weitere Artikel der Ausgabe 1/2017

Modelling optimal asset allocation when households experience health shocks

Surprises, sentiments, and the expectations hypothesis of the term structure of interest rates

The investment performance, attributes, and investment behavior of ethical equity mutual funds in the US: an empirical investigation

On the relationship between the number of a broker’s real estate listings and transaction outcomes

Corporate derivatives use policy and information environment

Does the requirement of an engagement partner signature improve financial analysts’ information environment in the United Kingdom?