Earnings Management and Annual General Meetings: The Role of Managerial Entrenchment

The Financial Review, Forthcoming

38 Pages Posted: 10 Aug 2012

See all articles by John Banko

John Banko

University of Florida

Melissa B. Frye

University of Central Florida - College of Business Administration

Weishen Wang

College of Charleston

Ann Marie Whyte

University of Central Florida

Date Written: August 1, 2012

Abstract

We examine earnings management around the annual general meeting (AGM) and assess the influence of managerial entrenchment. Consistent with prior research, we show positive and statistically significant abnormal returns surrounding AGMs regardless of the level of managerial entrenchment. We find evidence of significant earnings manipulation primarily among entrenched managers. Specifically, they manage abnormal accruals downwards two quarters prior to the AGM and significantly increase abnormal accruals in the quarter immediately before the AGM. Our evidence is consistent with AGMs triggering managers to disseminate information in a manner that shapes the market’s perception of the firm.

Keywords: Annual General Meeting, Earnings Management, Managerial Entrenchment, Shareholder Proposals

JEL Classification: G34, M41

Suggested Citation

Banko, John and Frye, Melissa and Wang, Weishen and Whyte, Ann Marie, Earnings Management and Annual General Meetings: The Role of Managerial Entrenchment (August 1, 2012). The Financial Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2121450

John Banko

University of Florida ( email )

PO Box 117165, 201 Stuzin Hall
Gainesville, FL 32610-0496
United States

Melissa Frye (Contact Author)

University of Central Florida - College of Business Administration ( email )

P.O. Box 161400
Department of Finance
Orlando, FL 32816
United States
407-823-3097 (Phone)

Weishen Wang

College of Charleston ( email )

66 George Street
Charleston, SC 29424
United States

Ann Marie Whyte

University of Central Florida ( email )

4000 Central Florida Blvd
Orlando, FL 32816-1400
United States

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