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Corporate Control and Managerial Misrepresentation of Firm Performance

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  • Gerald L. Salamon
  • E. Dan Smith

Abstract

This paper presents two tests of the hypothesis that the managers of management-controlled firms exercise their control over the information contained in annual reports in a manner which may misrepresent firm performance. The first test finds that management-controlled firms have a significantly smaller proportion of years in which the signs of unexpected accounting earnings and unexpected security returns are the same than do owner-controlled firms. The second test finds that the timing of certain accounting policy decisions made by the managers of management-controlled firms is related to the current level of the firm's security return performance.

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  • Gerald L. Salamon & E. Dan Smith, 1979. "Corporate Control and Managerial Misrepresentation of Firm Performance," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 319-328, Spring.
    • Handle: RePEc:rje:bellje:v:10:y:1979:i:spring:p:319-328
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    Cited by:

    1. Keune, Marsha B. & Keune, Timothy M. & Quick, Linda A., 2017. "Voluntary changes in accounting principle: Literature review, descriptive data, and opportunities for future research," Journal of Accounting Literature, Elsevier, vol. 39(C), pages 52-81.
    2. Missonier-Piera, Franck, 2007. "Motives for fixed-asset revaluation: An empirical analysis with Swiss data," The International Journal of Accounting, Elsevier, vol. 42(2), pages 186-205.
    3. Henry Tosi, 2008. "Quo Vadis? Suggestions for future corporate governance research," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 12(2), pages 153-169, May.
    4. G.A. Karathanassis & A.A. Drakos, 2004. "A note on equity ownership and corporate value in Greece," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(8), pages 537-547.
    5. Giancarlo Giudici & Stefano Paleari, 1997. "Income Shifting in Italian Business Groups and some Governance Implications," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 1(2), pages 207-230, June.
    6. Bushman, Robert M. & Indjejikian, Raffi J. & Smith, Abbie, 1996. "CEO compensation: The role of individual performance evaluation," Journal of Accounting and Economics, Elsevier, vol. 21(2), pages 161-193, April.
    7. Warfield, Terry D. & Wild, John J. & Wild, Kenneth L., 1995. "Managerial ownership, accounting choices, and informativeness of earnings," Journal of Accounting and Economics, Elsevier, vol. 20(1), pages 61-91, July.
    8. Agnes Nabet, 2000. "Le " Corporate Control " Et Le Risque Actionnarial : Une Revue De La Litterature," Post-Print halshs-00587491, HAL.

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