Recent theoretical and empirical studies suggest that blockholders (shareholders with ownership ≥ 5%) exert governance through the threat of exit. Blockholders have strong incentives to gather private information and sell their shares when managers are perceived to underperform. To prevent...

Using a large hand-collected sample of all blockholders (ownership ≥ 5%) of S&P 1500 firms for the years 2002–2009, we first document significant individual blockholder effects on earnings management (accrual-based earnings management, real earnings management, and restatements). This...

To estimate abnormal accruals, prior research employs a wide variety of models and estimation procedures. We evaluate the performance of three representative models – modified Jones model (MJ), MJ with operating cash flows (MJOCF), and MJ with return on assets (MJROA) – and two estimation...

Presumably, shareholder rights aim to better align the actions of managers with the interests of shareholders; however, it is not clear from prior research whether such alignment mitigates or exacerbates managers' propensity to manage earnings. We document that when shareholder rights are...