Managing Earnings Surprises in Japan: Perspectives from Main Bank Relationships and Institutional Ownership

23 Pages Posted: 13 Jul 2010

See all articles by Bok Baik

Bok Baik

Seoul National University

Wooseok Choi

Korea University Business School

Date Written: 2009-04

Abstract

In this study, we examine the impact of main bank relationships and institutional ownership on management's incentives to meet or beat analysts’ expectations in Japan. We hypothesize that close main bank relationships reduce managers’ incentives to meet or beat analysts’ expectations since investors place less weight on the need to achieve capital market-based performance benchmarks. Consistent with our prediction, we find that firms with close main bank relationships are less likely to meet or beat analysts’ expectations. In contrast, we find that the incidence of meeting or beating analysts’ consensus forecasts is greater for firms with institutional shareholders, suggesting that such investors place greater importance on achieving capital market–based performance benchmarks. Overall, our findings support the notion that banks and institutional investors play a significant role in firms’ financial reporting behavior.

Suggested Citation

Baik, Bok and Choi, Wooseok, Managing Earnings Surprises in Japan: Perspectives from Main Bank Relationships and Institutional Ownership (2009-04). Journal of Business Finance & Accounting, Vol. 37, Issue 5-6, pp. 495-517, June/July 2010, Available at SSRN: https://ssrn.com/abstract=1639209 or http://dx.doi.org/10.1111/j.1468-5957.2009.02167.x

Bok Baik (Contact Author)

Seoul National University ( email )

Seoul
Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)

Wooseok Choi

Korea University Business School ( email )

Anam-Dong Seongbuk-Gu
Seoul, 136-701
Korea
+82-2-3290-2814 (Phone)

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