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Earnings Management and Stock Market Listing

Author

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  • Kim, Hyonok
  • Yasuda, Yukihiro
  • 安田, 行宏

Abstract

We provide the first large sample comparison of earnings management by Japanese listed and unlisted firms. Based on the theoretical predictions by Stein (1989), we empirically examine whether managers’ myopic behaviors exist through inflating current earnings at the expense of long-term earnings. We find that listed firms are more likely to engage in earnings management. We also find that firm managers are more likely to manage earnings as the information content of current earnings about future earnings (stock price) increases. More importantly, we note that this manipulation is pronounced only for listed firms. This is the first study that empirically shows the market pressure for raising stock price induces earnings manipulation.

Suggested Citation

  • Kim, Hyonok & Yasuda, Yukihiro & 安田, 行宏, 2020. "Earnings Management and Stock Market Listing," Working Paper Series G-1-24, Hitotsubashi University Center for Financial Research.
    • Handle: RePEc:hit:hcfrwp:g-1-24
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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/31299/070hcfrWP_1_024.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Earnings Management; Myopic; Short-termism; Stock market pressure; Unlisted firms; Private firms;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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