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

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Listed:
  • Ayers, Benjamin C.
  • Ramalingegowda, Santhosh
  • Eric Yeung, P.

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.

Suggested Citation

  • Ayers, Benjamin C. & Ramalingegowda, Santhosh & Eric Yeung, P., 2011. "Hometown advantage: The effects of monitoring institution location on financial reporting discretion," Journal of Accounting and Economics, Elsevier, vol. 52(1), pages 41-61, June.
  • Handle: RePEc:eee:jaecon:v:52:y:2011:i:1:p:41-61
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    Cited by:

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    2. Boubaker, Sabri & Derouiche, Imen & Lasfer, Meziane, 2015. "Geographic location, excess control rights, and cash holdings," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 24-37.
    3. 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, pages 1-5.
    4. repec:eee:jaecon:v:64:y:2017:i:1:p:15-36 is not listed on IDEAS
    5. Hermes, Cornelis & Oxelheim, L. & Randoy, Trond & Hooghiemstra, Reginald, 2015. "The impact of board internationalization on earnings management," Research Report 15010-I&O, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
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    7. Boahen, Eric & Mamatzakis, Emmanuel, 2016. "Do Religion, Corporate Governance and BIG 4 Audit Interactions Affect Misclassification?," MPRA Paper 76804, University Library of Munich, Germany.
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    9. Xingqiang Du & Yingjie Du & Quan Zeng & Hongmei Pei & Yingying Chang, 2016. "Religious atmosphere, law enforcement, and corporate social responsibility: Evidence from China," Asia Pacific Journal of Management, Springer, pages 229-265.
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    11. Derouiche, Imen & Jaafar, Kaouther & Zemzem, Ahmed, 2016. "Firm geographic location and voluntary disclosure," Journal of Multinational Financial Management, Elsevier, pages 29-47.
    12. Xingqiang Du, 2015. "Does Confucianism Reduce Minority Shareholder Expropriation? Evidence from China," Journal of Business Ethics, Springer, pages 661-716.
    13. Kim, Incheol & Miller, Steve & Wan, Hong & Wang, Bin, 2016. "Drivers behind the monitoring effectiveness of global institutional investors: Evidence from earnings management," Journal of Corporate Finance, Elsevier, vol. 40(C), pages 24-46.
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    16. Pelucio-Grecco, Marta Cristina & Geron, Cecília Moraes Santostaso & Grecco, Gerson Begas & Lima, João Paulo Cavalcante, 2014. "The effect of IFRS on earnings management in Brazilian non-financial public companies," Emerging Markets Review, Elsevier, vol. 21(C), pages 42-66.
    17. repec:eee:corfin:v:47:y:2017:i:c:p:191-218 is not listed on IDEAS
    18. Hollander, Stephan & Verriest, Arnt, 2016. "Bridging the gap: the design of bank loan contracts and distance," Journal of Financial Economics, Elsevier, vol. 119(2), pages 399-419.
    19. O'Brien, Patricia C. & Tan, Hongping, 2015. "Geographic proximity and analyst coverage decisions: Evidence from IPOs," Journal of Accounting and Economics, Elsevier, pages 41-59.
    20. Belén Gill de Albornoz Noguer & Simona Rusanescu, 2017. "Foreign ownership and financial reporting quality in private subsidiaries," Working Papers. Serie EC 2017-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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