Large shareholders and the pressure to manage earnings
AbstractWe 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.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Corporate Finance.
Volume (Year): 16 (2010)
Issue (Month): 3 (June)
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Web page: http://www.elsevier.com/locate/jcorpfin
Blockholder monitoring Corporate governance Earnings management Equity offerings Insider-outsider conflict;
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