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Institutional investors, corporate governance, and earnings management around merger: evidence from French absorbing firms

Author

Listed:
  • Njah, Mouna

    (Sfax University)

  • Jarboui, Anis

    (Sfax University)

Abstract

This paper examines the association between institutional ownership and the earnings management beha- vior of some French absorbing firms. Using a sample of 76 French mergers and absorptions concluded over the period ranging from 2000 to 2010, we undertake to present some empirical evidence highlighting that absorbing-firms manipulate earnings relevant to the year preceding the merger-offer in the presence of i nstitutional cross-holding. However, the presence of active institutions turns out to limit the managerial accruals discretion. The monitoring role exerted by the active-institutional investors does restrict the oppor- tunities of earnings management around mergers and acquisitions. Further analyses suggest that the average value of discretionary accruals with regards to the absorbing firms proves to be influenced by the nature of merger deal (takeover vs. restructuring).

Suggested Citation

  • Njah, Mouna & Jarboui, Anis, 2013. "Institutional investors, corporate governance, and earnings management around merger: evidence from French absorbing firms," Journal of Economics, Finance and Administrative Science, Universidad ESAN, vol. 18(35), pages 89-96.
    • Handle: RePEc:ris:joefas:0065
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    File URL: http://zl.elsevier.es/en/revista/journal-of-economics-finance-and-352/articulo/institutional-investors-corporate-governance-and-90253429
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    Citations

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    Cited by:

    1. Abdul Ghafoor & Rozaimah Zainudin & Nurul Shahnaz Mahdzan, 2019. "Factors Eliciting Corporate Fraud in Emerging Markets: Case of Firms Subject to Enforcement Actions in Malaysia," Journal of Business Ethics, Springer, vol. 160(2), pages 587-608, December.
    2. Sheng Yao & Yadan Liu, 2020. "Air Quality Uncertainty and Earnings Management," Sustainability, MDPI, vol. 12(15), pages 1-19, July.
    3. Wanyi Chen & Ning Hu & Xiangfang Zhao, 2022. "Information asymmetry, regulatory inquiry, and company mergers and acquisitions: evidence from Shenzhen Stock Exchange comment letters," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(2), pages 2497-2542, June.
    4. Andrzej Piosik, 2021. "Revenue Identification in Attaining Consensus Estimates on Income Predictions: The Function of Ownership Concentration and Managerial Ownership Confirmation from Poland," Sustainability, MDPI, vol. 13(23), pages 1-16, December.
    5. Ruan, Yong-Ping & Song, Xin & Zheng, Kai, 2018. "Do large shareholders collude with institutional investors? Based on the data of the private placement of listed companies," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 508(C), pages 242-253.
    6. Trinh, Quoc Dat & Haddad, Christian & Salameh, Elie, 2023. "Financial institutional blockholders and earnings quality: Do blockholders contestability and countries' institutions matter?," International Review of Financial Analysis, Elsevier, vol. 87(C).
    7. Yi Luo & Lijun Lu & Shu Lin, 2021. "Ownership by Mutual Funds and Corporate Reporting of Environmental Responsibility: Empirical Evidence from China 2007–2019," Sustainability, MDPI, vol. 13(20), pages 1-18, October.

    More about this item

    Keywords

    Institutional investors; Discretionary accruals; Earnings management; Corporate governance;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General

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