Shareholder Activism and Earnings Management Incentives: An Empirical Examination of Shareholder Proposals in the United States

Autor:	Xu Frank Wang, Weimin Wang, William Zhang, Yan Sun
Rok vydání:	2013
Předmět:	Earnings Unintended consequences Accrual business.industry Institutional investor Accounting Job security Incentive Shareholder Earnings management Business Management and Accounting (miscellaneous) business Finance
Zdroj:	Journal of International Financial Management & Accounting. 24:234-260
ISSN:	0954-1314
Popis:	In this article, we investigate the effect of shareholder activism on earnings management. Using a US sample of shareholder pay-for-performance proposals sponsored by institutional investors, we find that when compared to control firms, firms targeted by shareholder proposals have a greater magnitude of discretionary accruals (DA) in their reported earnings. In addition, we find that the likelihood of meeting or beating earnings benchmarks through the use of DA is higher for targeted firms whose managers have job security concerns due to the firms’ inferior stock performance in the past or have plans to sell company stock. Our results are consistent with the notion that pay-for-performance proposals have unintended consequences by introducing or exacerbating incentives to manage earnings for short-term gains. The results also indicate that, for financial reporting, the short-termism effect may dominate the alignment and/or disciplinary effect of shareholder monitoring.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::a2e34e5fff67315b276df57225e99f4e https://doi.org/10.1111/jifm.12010 Zobrazit plný text záznamu Plný text ve formátu PDF Plný text ve formátu HTML
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