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Articles 1 - 19 of 19
Full-Text Articles in Business
Local Institutional Investors And Corporate Monitoring: Evidence From Cross-Listed Korean Stocks In The Us Market, Changhwan Choi, Chune Young Chung, Jun Myung Song
Local Institutional Investors And Corporate Monitoring: Evidence From Cross-Listed Korean Stocks In The Us Market, Changhwan Choi, Chune Young Chung, Jun Myung Song
Sim Kee Boon Institute for Financial Economics
Using Korean firms that are cross-listed in the US market, this paper investigates whether there are standalone effects of geographic and market proximity of institutional investors on monitoring performance. We find that Korean institutional ownership is negatively associated with earnings management while the US institutional ownership has no impact on earnings management. This suggests that there is the geographic proximity advantage over the market proximity advantage in the emerging markets. Furthermore, we also show that the impact of geographic proximity is stronger for firms with high informational opacity
Conflict Or Alignment? The Role Of Return-Oriented Foreign Shareholders And Domestic Relational Shareholders In Mitigating Earnings Management, Toru Yoshikawa, Ignacio P. Requejo, Asli Colpan, Daisuke Uchida
Conflict Or Alignment? The Role Of Return-Oriented Foreign Shareholders And Domestic Relational Shareholders In Mitigating Earnings Management, Toru Yoshikawa, Ignacio P. Requejo, Asli Colpan, Daisuke Uchida
Research Collection Lee Kong Chian School Of Business
This study investigates the effects of foreign return-oriented shareholders and domestic relational shareholders of Japanese companies on the earnings management behavior of their invested firms when stock option pay is adopted. We theorize that foreign shareholders seek short-term returns and do not engage in close monitoring due to an information disadvantage while domestic shareholders prevent managerial behavior that distorts information disclosure. Our findings show that managers of firms that use stock option pay engage in earnings management to increase their private financial benefits and meet capital markets’ expectations, which allows them to enhance their own reputation. However, this managerial behavior …
Audit Adjustments And The Discontinuity In Earnings Distribution Around Zero, Chu Yeong Lim, Themin Suwardy, Tracey Chunqi Zhang
Audit Adjustments And The Discontinuity In Earnings Distribution Around Zero, Chu Yeong Lim, Themin Suwardy, Tracey Chunqi Zhang
Research Collection School Of Accountancy
Accounting researchers have documented that a discontinuity exists in earnings distribution around zero. However, there is considerable debate among researchers whether the earnings discontinuity around zero is caused by earnings management. We aim to shed light on the earnings discontinuity debate by examining the impact of audit adjustments on the distribution of earnings using a unique dataset from Singapore containing both recorded and waived adjustments. We find that audit adjustments do not reduce the discontinuity of earnings distribution around zero. This affirms that the results of Lennox et. al (2016) based on pre-tax earnings also apply to post-tax earnings and …
Moving Towards Principles-Based Accounting Standards: The Impact Of The New Revenue Standard On The Quality Of Accrual Accounting, He, Huiyu
Dissertations and Theses Collection (Open Access)
The new revenue standard (ASU 2014-09, codified in ASC 606 and ASC 340-40) establishes a comprehensive framework on accounting for contracts with customers and replaces most existing revenue recognition rules. The new guidance removes the inconsistencies and weaknesses of legacy guidance, while is more principles-based and requires more managerial judgements. Using as-reported data from structured filings to construct aggregate accruals that are potentially affected by the new revenue standard (i.e., sales-related accruals), I find that the new revenue standard increases the quality of sales-related accruals, as measured by future cash flow predictability. The increased cash flow predictability comes not only …
Gdp Growth Incentives And Earnings Management: Evidence From China, Xia Chen, Qiang Cheng, Ying Hao, Qiang Liu
Gdp Growth Incentives And Earnings Management: Evidence From China, Xia Chen, Qiang Cheng, Ying Hao, Qiang Liu
Research Collection School Of Accountancy
Using data from China, we examine whether and how the incentive to boost GDP growth at the government level affects earnings management at the firm level. We find that firms in provinces with GDP growth lower than the national level or the average of the adjacent provinces are more likely to engage in earnings management than firms in other provinces. Specifically, they are more likely to inflate revenues, overproduce, and delay asset impairment losses. The aggregate earnings management induced by GDP growth incentives accounts for about 0.5% of GDP. The results are stronger for local state-owned enterprises, in provinces with …
Marital Status And Earnings Management, Gilles Hillary, Sterling Huang, Yanping Xu
Marital Status And Earnings Management, Gilles Hillary, Sterling Huang, Yanping Xu
Research Collection School Of Accountancy
In this note, we examine the effect of CEO marital status on the riskiness of financial reporting. Using multiple proxies, we find that firms headed by a single CEO display a higher degree of earnings management than those headed by a married CEO. The effect is economically significant. Our results persist in an instrumental variable regression, suggesting that our results are not driven by innate heterogeneity in preferences.
Ceo Overconfidence And Management Forecasting, Paul Hribar, Holly I. Yang
Ceo Overconfidence And Management Forecasting, Paul Hribar, Holly I. Yang
Research Collection School Of Accountancy
This paper examines how overconfidence affects the properties of management forecasts. Using both the ‘over‐optimism’ and ‘miscalibration’ effects of overconfidence to generate our predictions, we examine three research questions. First, we examine whether overconfidence increases the likelihood of issuing a forecast. Second, we examine whether overconfidence increases the amount of optimism in management forecasts. Third, we examine whether overconfidence increases the specificity and precision of the forecast. We use both options‐ and press‐based measures to proxy for individual overconfidence, and find support for all three research questions. We further find that the results are concentrated among firms that provide forecasts …
Does Increased Board Independence Reduce Earnings Management? Evidence From Recent Regulatory Reforms, Qiang Cheng, Xia Chen, Xin Wang
Does Increased Board Independence Reduce Earnings Management? Evidence From Recent Regulatory Reforms, Qiang Cheng, Xia Chen, Xin Wang
Research Collection School Of Accountancy
In this paper, we examine whether recent regulatory reforms requiring majority board independence are effective in reducing earnings management. Firms that did not have a majority of independent directors prior to the reforms (referred to as non-compliance firms) are required to increase their board independence. We find that overall, compared to the other firms, noncompliance firms do not experience a significant decrease in the extent of earnings management from prior to the reforms to afterwards. However, we find that non-compliance firms with low information acquisition cost experience a significant reduction in earnings management compared with the other firms. The results …
Does Increased Board Independence Reduce Earnings Management? Evidence From The Recent Regulatory Reform, Xia Chen, Qiang Cheng, Xin Wang
Does Increased Board Independence Reduce Earnings Management? Evidence From The Recent Regulatory Reform, Xia Chen, Qiang Cheng, Xin Wang
Research Collection School Of Accountancy
We examine whether recent regulatory reforms requiring majority board independence reduce the extent of earnings management. Firms that did not have a majority of independent directors before the reforms (referred to as noncompliant firms) are required to increase their board independence. We find that, while noncompliant firms on average do not experience a significant decrease in earnings management after the reforms compared to other firms, noncompliant firms with low information acquisition cost experience a significant reduction in earnings management. The results are similar when we examine audit committee independence and when we use alternative proxies for information acquisition cost and …
Do Managers Use Meeting Analyst Forecasts To Signal Private Information? Evidence From Patent Citations, Katherine Gunny, Tracey Chunqi Zhang
Do Managers Use Meeting Analyst Forecasts To Signal Private Information? Evidence From Patent Citations, Katherine Gunny, Tracey Chunqi Zhang
Research Collection School Of Accountancy
This study examines whether firms manage earnings to meet analyst forecasts to signal superior future performance. Prior research finds that firms use earnings management to just meet analyst forecasts and that these firms have a positive association with future performance (Bartov et al., 2002). There are two potential explanations for the positive association – signaling and attaining benefits that allow for better future performance (i.e., the real benefits explanation). Prior studies cannot provide evidence of signaling because they do not control for the real benefits explanation. Our research design enables us to control for the real benefits explanation because we …
Effects Of National Culture On Earnings Quality Of Banks, Chee Yeow Lim, Kanagaretnam Kiridaran, Gerald J. Lobo
Effects Of National Culture On Earnings Quality Of Banks, Chee Yeow Lim, Kanagaretnam Kiridaran, Gerald J. Lobo
Research Collection School Of Accountancy
We examine the relation between four dimensions of national culture and earnings quality of banks using a sample of banks from 39 countries. Our main analysis, which focuses on the pre-financial crisis period 1993–2006, indicates that banks in high individualism, high masculinity, and low uncertainty avoidance societies manage earnings to just-meet-or-beat the prior year's earnings. In tests of income smoothing through loan loss provisions, we find that banks in high individualism, high power distance, and low uncertainty avoidance societies report smoother earnings. Our exploratory analysis of the effects of national culture on accounting outcomes during the financial crisis period 2007–2008 …
Executive Equity Compensation And Earnings Management: A Quantile Regression Approach, Chih-Ying Chen, Ming-Yuan Li
Executive Equity Compensation And Earnings Management: A Quantile Regression Approach, Chih-Ying Chen, Ming-Yuan Li
Research Collection School Of Accountancy
Prior research has investigated the association between executive equity compensation and earnings management but the evidence is not conclusive. We investigate this question using the quantile regression approach which allows the coefficient on the independent variable (equity compensation) to shift across the distribution of the dependent variable (earnings management). Based on a sample of 18,203 U.S. non-financial firm-year observations from 1995 to 2008, we find that chief executive officer (CEO) equity compensation is positively associated with the absolute value of discretionary accruals at all quantiles of absolute discretionary accruals, but the association becomes weaker as the quantile decreases. The association …
Do Abnormally High Audit Fees Impair Audit Quality?, Jong-Hag Choi, Jeong-Bon Kim, Yoonseok Zang
Do Abnormally High Audit Fees Impair Audit Quality?, Jong-Hag Choi, Jeong-Bon Kim, Yoonseok Zang
Research Collection School Of Accountancy
This study examines whether and how audit quality proxied by the magnitude of absolute discretionary accruals is associated with abnormal audit fees, that is, the difference between actual audit fee and the expected, normal level of audit fee. The results of various regressions reveal that the association between the two is asymmetric, depending on the sign of the abnormal audit fee. For observations with negative abnormal audit fees, there is no significant association between audit quality and abnormal audit fee. In contrast, abnormal audit fees are negatively associated with audit quality for observations with positive abnormal audit fees. Our findings …
Auditor Reputation And Earnings Management: International Evidence From The Banking Industry, Kanagaretnam Kiridaran, Chee Yeow Lim, Gerald J. Lobo
Auditor Reputation And Earnings Management: International Evidence From The Banking Industry, Kanagaretnam Kiridaran, Chee Yeow Lim, Gerald J. Lobo
Research Collection School Of Accountancy
We examine the relation between auditor reputation and earnings management in banks using a sample of banks from 29 countries. In particular, we examine the implications of two aspects of auditor reputation, auditor type and auditor industry specialization, for earnings management in banks. We find that both auditor type and auditor industry specialization moderate benchmark-beating (loss-avoidance and just-meeting-or-beating prior year’s earnings) behavior in banks. In addition, we find that once auditor type and auditor industry specialization are included in the same tests, only auditor industry specialization has a significant impact on constraining benchmark-beating behavior. In separate tests related to income-increasing …
Why Does Corporate Governance Matter? Evidence From Seasoned Bond Offerings, Fang Wang
Why Does Corporate Governance Matter? Evidence From Seasoned Bond Offerings, Fang Wang
Dissertations and Theses Collection (Open Access)
To examine the importance of corporate governance, I look at how management and investors behave in the event of seasoned bond offerings, controlling for the corporate governance structure of issuing firms. I find that companies with the weakest governance structure aggressively manipulate their earnings upwards during the two years prior to the debt issuances. And when the bond offerings are announced to the market, these same firms experienced positive abnormal returns over a three day event period, indicating that investors of poorly governed firms value a debt financing for the alleged decrease in agency cost.
Does Corporate Governance Matter, Evidence From Earnings Management Practices In Singapore, Lingxu Hu
Does Corporate Governance Matter, Evidence From Earnings Management Practices In Singapore, Lingxu Hu
Dissertations and Theses Collection (Open Access)
This paper addresses two questions. First, do good corporate governance practices add values to company or does it lead to higher stock returns in Singapore? Second, does poorly governed listed company in SGX tend to manage their earnings by using discretionary accruals? Following the approach of Gompers et al. (2003), we formed two portfolios consisting of well-governed and poorly governed companies. Well governed companies are able to maintain a higher return relative to poorly governed companies. I also look at the firm valuation from the adoption of corporate governance practices. Our result shows a positive relationship between firm valuation and …
Corporate Governance And Earnings Management Before Share Repurchase Announcements In Singapore, Jian Ming Chua
Corporate Governance And Earnings Management Before Share Repurchase Announcements In Singapore, Jian Ming Chua
Dissertations and Theses Collection (Open Access)
Share repurchase in Singapore was legalized in 1998. It is well known that investors view share repurchase as good news. This study is based on share repurchase announcements from 2006 to 2009. The mean Cumulative Market-Adjusted Returns (CAR) for the period [0, +1] and [-1, +1] are significant at 1.25% and 1.33% respectively. In Singapore, there are positive abnormal returns following share repurchase announcements in support of the ―free cash flow‖ hypothesis. By using the Singapore Corporate Governance Index as a proxy, the weakly governed companies exhibit the strongest, positive and significant CAR of 2.62% for the period [0, +1]. …
Performance, Growth And Earnings Management, Chi Wen Jevons Lee, Laura Yue Li, Heng Yue
Performance, Growth And Earnings Management, Chi Wen Jevons Lee, Laura Yue Li, Heng Yue
Research Collection School Of Accountancy
We study the relationship between the amount of managed earnings and firms' earnings performance and expected growth in a reporting model, where managers manipulate earnings to influence the valuation of firms' equity while bearing a cost that is increasing and convex in the amount of managed earnings. In the unique revealing equilibrium to the model, firms with higher performance and growth over-report earnings by a larger amount because price responsiveness increases with earnings performance and growth. And earnings quality, defined as the proportion of true economic earnings in total reported earnings, increases with earnings performance but decreases with earnings growth. …
The Association Between Audit Quality And Abnormal Audit Fees, Jong-Hag Choi, Jeong-Bon Kim, Yoonseok Zang
The Association Between Audit Quality And Abnormal Audit Fees, Jong-Hag Choi, Jeong-Bon Kim, Yoonseok Zang
Research Collection School Of Accountancy
Using a sample of 9,820 firm-year observations over the 2000-2003 period, this paper examines whether, and how, audit quality proxied by unsigned discretionary accruals is associated with abnormal audit fees, i.e., actual audit fees in excess of expected, normal audit fees. The results of various regressions reveal that the association between the two is insignificant for the full sample, significantly positive for the subsample of clients with positive abnormal fees, and insignificantly negative for the subsample of clients with negative abnormal fees. The above results suggest that auditors’ incentives to compromise audit quality differ systematically for more profitable clients (with …