An Investigation of Factors Influencing the Association between Top Management Ownership and Earnings Management
37 Pages Posted: 21 Dec 2007
Date Written: 2007
This study conjectures and shows that the level of top management stock ownership is non-monotonically associated with managers' propensity to manage earnings. Increasing ownership from low levels decreases earnings management while ownership at high levels increases earnings management. Further, this study attempts to discern when the effects of management ownership are more salient for the firm. The results of this exploratory analysis of 15,945 firm observations over a six-year period show that the non-monotonic association between top management ownership and earnings management is significant, and hence more important, for the firm characteristics of low growth opportunities, high operating volatility, small size, frequent losses, high-technology, and low institutional ownership.
Keywords: Management ownership, earnings management, discretionary accruals, firm characteristics
JEL Classification: G34, G10
Suggested Citation: Suggested Citation