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Creditor Rights and Real Earnings Management: Evidence from Quasi-Natural Experiments

Author

Listed:
  • H. Zhang
  • S. Boubaker

    (Métis Lab EM Normandie - EM Normandie - École de Management de Normandie)

  • X. Ni

Abstract

This paper exploits the staggered adoption of anti-recharacterization laws across the U.S. states as quasi-natural experiments to study the role of creditor rights in affecting real earnings management. The empirical findings show that strengthening creditor rights significantly increases real earnings management in nonfinancial firms. This effect is more pronounced for firms with higher distress risk and weaker governance. Our findings are robust to a battery of sensitivity checks and reveal increased real earnings management as an unintended consequence of strengthening creditor rights. \textcopyright 2023 Elsevier Inc.

Suggested Citation

  • H. Zhang & S. Boubaker & X. Ni, 2023. "Creditor Rights and Real Earnings Management: Evidence from Quasi-Natural Experiments," Post-Print hal-04435476, HAL.
    • Handle: RePEc:hal:journl:hal-04435476
    DOI: 10.1016/j.frl.2023.103629
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    Cited by:

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    4. Ren, Yi-Shuai & Derouiche, Imen & Hassan, Majdi & Liu, Pei-Zhi, 2024. "Do creditors price climate transition risks? A natural experiment based on China's carbon emission trading scheme," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 138-155.

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    More about this item

    Keywords

    Anti-recharacterization law; Creditor right; Monitoring; Real earnings management; Short-termism;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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