Managerial entrenchment and earnings management

Fabrizio Di Meo*, Juan Manuel García Lara, Jordi Surroca

*Corresponding author voor dit werk

OnderzoeksoutputAcademicpeer review

52 Citaten (Scopus)
406 Downloads (Pure)

Samenvatting

Agency theorists have long contended that managerial entrenchment is detrimental for shareholders, because it protects managers from the discipline of corporate governance. However, as a competing hypothesis, we argue that entrenchment can also provide benefits for the firm's owners: it leads managers to be less myopic in managing earnings to meet short-term financial reporting goals. Our findings are consistent with this prediction as they suggest that, when there are incentives to manipulate firms' performance, entrenched managers are less prone to engage in earnings management activities that hurt shareholders. Specifically, we focus on firms that just meet or marginally beat earnings benchmarks and document a negative association between managerial entrenchment and both the opportunistic use of accruals and the manipulation of real activities. We also show that earnings management is less detrimental to firm value if the manager is entrenched. Finally, we find that these effects of entrenchment on earnings management are only present for firms domiciled in Delaware.

Originele taal-2English
Pagina's (van-tot)399-414
Aantal pagina's16
TijdschriftJournal of Accounting and Public Policy
Volume36
Nummer van het tijdschrift5
DOI's
StatusPublished - 2017

Vingerafdruk

Duik in de onderzoeksthema's van 'Managerial entrenchment and earnings management'. Samen vormen ze een unieke vingerafdruk.

Citeer dit