Institutional Investors and Bank Governance: Evidence from Earnings Management

51 Pages Posted: 17 Jan 2018 Last revised: 29 Oct 2019

See all articles by Steve Miller

Steve Miller

USF Sarasota-Manatee

Rabih Moussawi

Villanova University - Department of Finance; University of Pennsylvania - The Wharton School

Bin Wang

Marquette University - College of Business Administration

Tina Yang

University of South Florida - St. Petersburg

Date Written: February 6, 2019

Abstract

Despite the growing importance of institutional investors in global capital markets and the link between bank earnings management and financial crash risk, little is known about institutional investors’ role in mitigating bank earnings management. We conduct the first international analysis of this issue using a broad sample of banks and institutional investors. We find that institutional ownership is more negatively related to earnings management in countries with more-stringent bank disclosure requirements or when ownership is held by domestic rather than foreign institutional investors. Institutional ownership is also more negatively related to earnings management in countries with weaker investor protection or when ownership is held by institutional blockholders. Our results have important implications for policies regarding institutional investors’ ownership engagement with banks.

Keywords: institutional investors, earnings management, banks, bank regulations, corporate governance

JEL Classification: G2, G15, G32, G34, M41

Suggested Citation

Miller, Steve and Moussawi, Rabih and Wang, Bin and Yang, Tina, Institutional Investors and Bank Governance: Evidence from Earnings Management (February 6, 2019). Available at SSRN: https://ssrn.com/abstract=3100101 or http://dx.doi.org/10.2139/ssrn.3100101

Steve Miller (Contact Author)

USF Sarasota-Manatee ( email )

Sarasota, FL
United States

Rabih Moussawi

Villanova University - Department of Finance ( email )

800 E Lancaster Ave
Bartley Hall, 2051
Villanova, PA 19085
United States

HOME PAGE: http://www.homepage.villanova.edu/rabih.moussawi

University of Pennsylvania - The Wharton School ( email )

United States

Bin Wang

Marquette University - College of Business Administration ( email )

P.O. Box 1881
Milwaukee, WI 53201-1881
United States

Tina Yang

University of South Florida - St. Petersburg ( email )

140 7th Ave S
Kate Tiedemann College of Business
St. Petersburg, FL 33701
United States
7278734568 (Phone)

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