Earnings management and institutional investors: behavioral insights into stress-driven decision-making
The development of capital markets is influenced by the quality of accounting information, and the separation of ownership and control leads to a misalignment of interests between management and shareholders. Considering self-serving motives, management often has a need for earnings management. This...
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| Main Authors: | , , |
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| Format: | Proceedings |
| Language: | en |
| Published: |
Faculty of Business, Economics and Accountancy Universiti Malaysia Sabah
2024
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| Subjects: | |
| Online Access: | https://eprints.ums.edu.my/id/eprint/43286/1/FULL%20TEXT.pdf https://eprints.ums.edu.my/id/eprint/43286/ https://drive.google.com/file/d/1YjA3xKgUKe1Wnfjs03wAztMlrQF0nzKR/view |
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| Summary: | The development of capital markets is influenced by the quality of accounting information, and the separation of ownership and control leads to a misalignment of interests between management and shareholders. Considering self-serving motives, management often has a need for earnings management. This study investigates the impact of institutional investor heterogeneity on earnings management, with a particular focus on the behavioral differences between stress-resistant and stress-sensitive institutional investors. Through empirical analysis of the roles of different types of institutional investors in real earnings management, we find that stress-resistant institutional investors exhibit strong resistance to earnings management, significantly curbing such practices within companies. In contrast, stress sensitive institutional investors are more susceptible to short-term performance pressures and tend to support earnings management strategies to maintain short-term performance. Therefore, the characteristics of institutional investors play a crucial role in shaping a firm's earnings management strategies. These findings provide new insights into the behavior of different types of institutional investors and offer valuable implications for companies when formulating their earnings management strategies. |
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