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

24 Pages Posted: 5 Apr 2013

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: May 2013

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 downward 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 (May 2013). Financial Review, Vol. 48, Issue 2, pp. 259-282, 2013. Available at SSRN: https://ssrn.com/abstract=2245397 or http://dx.doi.org/10.1111/fire.12003

John Banko

University of Florida ( email )

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

Melissa Frye

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

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