Institutional ownership, earnings management and earnings surprises: evidence from 39 years of U.S. data

• Autores: Davis, Justin G., Garcıa-Cestona, Miguel
• Formato: artículo
• Fecha de Publicación: 2023
• Institución: Universidad ESAN
• Repositorio: ESAN-Institucional
• Lenguaje: inglés
• OAI Identifier: oai:repositorio.esan.edu.pe:20.500.12640/3676
• Enlace del recurso: https://hdl.handle.net/20.500.12640/3841; https://doi.org/10.1108/JEFAS-01-2023-0021
• Nivel de acceso: acceso abierto
• Materia: Financial reporting quality; Institutional investor ownership; Earnings management; Earnings surprises; Corporate governance; Nonlinearity; Calidad de los informes financieros; Propiedad de inversores institucionales; Gestión de beneficios; Sorpresas en los resultados; Gobierno corporativo; No linealidad; https://purl.org/pe-repo/ocde/ford#5.02.04

Purpose: As the influence of institutional investors over managerial decision-making grows, so does the importance of understanding the effect of institutional investor ownership (IO) on firm outcomes. The authors take a comprehensive approach to studying the effect of IO on earnings management (EM). Design/methodology/approach: The authors study the relation between IO and EM using a sample of 59,503 listed U.S. firm-year observations from 1981–2019. The authors proxy EM with earnings surprises and with accrual-based and real activity measures. The authors test for nonlinear relations and analyze changes resulting from the passage of the Sarbanes–Oxley Act. Findings: The findings support a positive IO-EM relation overall, but show that the relation is dynamic and heavily context-dependent with evidence of nonlinearity. The authors also find evidence that IO positively affects accrual-based EM and real activities EM negatively. Originality/value: To the authors’ knowledge, this is the first study of the IO-EM relation to consider evidence of nonlinearity in the U.S. context, measuring changes to the relation over time, and with the use of several measures of EM.