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Do shareholder rights influence managerial propensity to engage in earnings management?

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  • Kenneth Small
  • Seung Kwag
  • Joanne Li

Abstract

We examine the relationship between shareholder rights and managerial propensity to engage in earnings smoothing. Using a measure of shareholder rights, and after controlling for factors that influence management’s decision to manage earnings, we conclude that increases in shareholder rights significantly increase management’s willingness to engage in earnings management. We find that firms with more democratic governance systems tend to have higher levels of current discretionary accruals and firms with less democratic governance structures tend to have lower levels of current discretionary accruals. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Kenneth Small & Seung Kwag & Joanne Li, 2015. "Do shareholder rights influence managerial propensity to engage in earnings management?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(2), pages 308-326, April.
    • Handle: RePEc:spr:jecfin:v:39:y:2015:i:2:p:308-326
    DOI: 10.1007/s12197-013-9254-2
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    Cited by:

    1. Chen, Haiwei & Jory, Surendranath & Ngo, Thanh, 2020. "Earnings management under different ownership and corporate governance structure: A natural experiment with master limited partnerships," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 139-156.

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    More about this item

    Keywords

    Corporate governance; Shareholder rights; Earnings management; Managerial incentives; G30; G34; G39;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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