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Hometown advantage: The effects of monitoring institution location on financial reporting discretion

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  • Ayers, Benjamin C.
  • Ramalingegowda, Santhosh
  • Eric Yeung, P.
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    Abstract

    We examine the impact of institutional ownership on financial reporting discretion, focusing on whether the impact varies with institutions' cost of acquiring monitoring information. Using geographic distance between the firm and the institutional investor as a proxy for the cost of acquiring monitoring information, we find that corporate managers are less likely to use financial reporting discretion in the presence of local monitoring institutions than distant monitoring institutions. We also find that the impact of monitoring institutions on financial reporting discretion varies with the costs and benefits of financial reporting discretion.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0165410111000334
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Accounting and Economics.

    Volume (Year): 52 (2011)
    Issue (Month): 1 (June)
    Pages: 41-61

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    Handle: RePEc:eee:jaecon:v:52:y:2011:i:1:p:41-61

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    Web page: http://www.elsevier.com/locate/jae

    Related research

    Keywords: Reporting discretion Institutional investors Geographic distance Corporate governance Earnings management;

    References

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    Cited by:
    1. Dan Dacian Cuzdriorean, 2013. "Most Recent Findings In Earnings Management Area: Interesting Insights From Traditionally Top 5 Leading Accounting Journals," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(15), pages 5.
    2. Marta Cristina Pelucio Grecco, 2013. "The Effect of Brazilian convergence to IFRS on earnings managment by listed Brazilian nonfinancial companies," Brazilian Business Review, Fucape Business School, vol. 10(4), pages 110-132, October.

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