Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/289634 
Year of Publication: 
2023
Citation: 
[Journal:] Journal of Economics, Finance and Administrative Science [ISSN:] 2218-0648 [Volume:] 28 [Issue:] 56 [Year:] 2023 [Pages:] 218-236
Publisher: 
Emerald Publishing Limited, Bingley
Abstract: 
Purpose - As the influence of institutional investors over managerial decision-making grows, so does the importance of understanding the effect of institutional investor ownership (IO) on firm outcomes. The authors take a comprehensive approach to studying the effect of IO on earnings management (EM). Design/methodology/approach The authors study the relation between IO and EM using a sample of 59,503 listed U.S. firm-year observations from 1981-2019. The authors proxy EM with earnings surprises and with accrual-based and real activity measures. The authors test for nonlinear relations and analyze changes resulting from the passage of the Sarbanes-Oxley Act. Findings The findings support a positive IO-EM relation overall, but show that the relation is dynamic and heavily context-dependent with evidence of nonlinearity. The authors also find evidence that IO positively affects accrual-based EM and real activities EM negatively. Originality/value To the authors' knowledge, this is the first study of the IO-EM relation to consider evidence of nonlinearity in the U.S. context, measuring changes to the relation over time, and with the use of several measures of EM.
Subjects: 
Corporate governance
Earnings management
Earnings surprises
Financial reporting quality
Institutional investor ownership
Nonlinearity
JEL: 
G23
G32
G34
M41
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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