Large shareholders and the pressure to manage earnings
We present empirical evidence that firms inflate earnings around seasoned equity offerings in the presence of large outsider blockholdings, but not in their absence. The finding is robust to several alternative explanations, including differences in firm characteristics, growth, performance, CEO incentives, and capital usage. While we do not dispute that CEOs behave opportunistically, we challenge that earnings management is solely a symptom of weak governance. We conclude that strengthening shareholder power to alleviate the conflict between shareholders and management can also have the unintended consequence of intensifying the conflict between current and future shareholders.
Year of publication: |
2010
|
---|---|
Authors: | Guthrie, Katherine ; Sokolowsky, Jan |
Published in: |
Journal of Corporate Finance. - Elsevier, ISSN 0929-1199. - Vol. 16.2010, 3, p. 302-319
|
Publisher: |
Elsevier |
Keywords: | Blockholder monitoring Corporate governance Earnings management Equity offerings Insider-outsider conflict |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
On the objective of corporate boards : theory and evidence
Guthrie, Katherine, (2008)
-
Large shareholders and the pressure to manage earnings
Guthrie, Katherine, (2010)
-
Accounting choice and the fair value option
Guthrie, Katherine, (2011)
- More ...