The Monitoring Role of the Media: Evidence from Earnings Management
51 Pages Posted: 23 Mar 2017 Last revised: 17 Jun 2020
Date Written: June 17, 2020
In response to the recent debate on the media, this paper examines the effect of media coverage on firm earnings management. Even if prior studies (Miller 2006; Dyck et al. 2010) have documented the media’s role in detecting and deterring accounting fraud (or extreme earnings management), it is unclear ex-ante whether the media amplifies or curbs less egregious earnings management. Our results show that media coverage is negatively associated with both accrual-based and real earnings management, suggesting that the media serves as an external monitor that curbs managers’ opportunistic earnings management behaviors. Further analyses show that the effect of media coverage on earnings management is more pronounced when monitoring from auditors is weak and when the other information intermediaries are active. Overall, the findings suggest a monitoring role of the media in firm financial reporting practices.
Keywords: Media Coverage, Earnings Management, Monitoring
JEL Classification: M41, G14, G34
Suggested Citation: Suggested Citation