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Article: The effect of shareholder activism on earnings management: Evidence from shareholder proposals

TitleThe effect of shareholder activism on earnings management: Evidence from shareholder proposals
Authors
KeywordsAccrual-based earnings management
Real activities manipulation
Shareholder activism
Shareholder proposals
Issue Date2021
Citation
Journal of Corporate Finance, 2021, v. 69, article no. 102014 How to Cite?
AbstractWe find that in general, both accrual-based and real earnings management decrease after the passage of shareholder-sponsored governance proposals. However, when accounting for the type of proposal, we observe significant heterogeneity in the effects on earnings management. Specifically, proposals focused on changing the governance structure (e.g., board independence) lead to reductions in both types of earnings management, whereas proposals specifically targeted at improving financial reporting quality lead to decreased accrual-based earnings management but increased real earnings management. The results suggest that constraints on accrual-based earnings management induce a shift toward real earnings management. Our paper indicates that the nature of the shareholder proposal has a significant impact on shareholder intervention.
Persistent Identifierhttp://hdl.handle.net/10722/315197
ISSN
2023 Impact Factor: 7.2
2023 SCImago Journal Rankings: 3.182
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorNg, Jeffrey-
dc.contributor.authorWu, Hong-
dc.contributor.authorZhai, Weihuan-
dc.contributor.authorZhao, Jing-
dc.date.accessioned2022-08-05T10:18:00Z-
dc.date.available2022-08-05T10:18:00Z-
dc.date.issued2021-
dc.identifier.citationJournal of Corporate Finance, 2021, v. 69, article no. 102014-
dc.identifier.issn0929-1199-
dc.identifier.urihttp://hdl.handle.net/10722/315197-
dc.description.abstractWe find that in general, both accrual-based and real earnings management decrease after the passage of shareholder-sponsored governance proposals. However, when accounting for the type of proposal, we observe significant heterogeneity in the effects on earnings management. Specifically, proposals focused on changing the governance structure (e.g., board independence) lead to reductions in both types of earnings management, whereas proposals specifically targeted at improving financial reporting quality lead to decreased accrual-based earnings management but increased real earnings management. The results suggest that constraints on accrual-based earnings management induce a shift toward real earnings management. Our paper indicates that the nature of the shareholder proposal has a significant impact on shareholder intervention.-
dc.languageeng-
dc.relation.ispartofJournal of Corporate Finance-
dc.subjectAccrual-based earnings management-
dc.subjectReal activities manipulation-
dc.subjectShareholder activism-
dc.subjectShareholder proposals-
dc.titleThe effect of shareholder activism on earnings management: Evidence from shareholder proposals-
dc.typeArticle-
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.jcorpfin.2021.102014-
dc.identifier.scopuseid_2-s2.0-85110219001-
dc.identifier.volume69-
dc.identifier.spagearticle no. 102014-
dc.identifier.epagearticle no. 102014-
dc.identifier.isiWOS:000693225000033-

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