Blockholder Exit Threats and Financial Reporting Quality

Dou, Yiwei; Hope, Ole‐Kristian; Thomas, Wayne B.; Zou, Youli

doi:10.2139/ssrn.2374770

Cited by 20 publications

(47 citation statements)

References 50 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…These findings suggest that a significant proportion of blockholder heterogeneity remains to be explained, and thus there is ample opportunity for future research to understand the mechanisms through which shareholders impact financial reporting. 5 Dou et al (2016) find that the interaction between blockholder competition and liquidity (proxying for the intensity of exit threat) is positively associated with accounting quality. A key difference between this study and Dou et al (2016) is that this paper examines individual blockholders whereas Dou et al (2016) focus exclusively on blockholder structures (i.e., block ownership concentration).…”

Section: (I) Backgroundmentioning

confidence: 94%

“…5 Dou et al (2016) find that the interaction between blockholder competition and liquidity (proxying for the intensity of exit threat) is positively associated with accounting quality. A key difference between this study and Dou et al (2016) is that this paper examines individual blockholders whereas Dou et al (2016) focus exclusively on blockholder structures (i.e., block ownership concentration). large shareholders likely have heterogeneous beliefs, skills, and preferences and therefore will influence firms through different channels and in different ways.…”

Section: (I) Backgroundmentioning

confidence: 94%

See 1 more Smart Citation

Individual Large Shareholders, Earnings Management, and Capital‐Market Consequences

Dou¹,

Hope²,

Thomas³

et al. 2016

Business Fin & Account

Self Cite

View full text Add to dashboard Cite

Using a large hand‐collected sample of all blockholders (ownership ≥ 5%) of S&P 1500 firms for the years 2002–2009, we first document significant individual blockholder effects on earnings management (accrual‐based earnings management, real earnings management, and restatements). This association is driven primarily by these large shareholders influencing rather than selecting firms’ financial reporting practices. Second, the market's reaction to earnings announcements suggests that investors recognize the heterogeneity in blockholders’ influence on earnings management. The results highlight the highly individualized effects of blockholders and a mechanism through which shareholders impact reported earnings.

show abstract

Section: (I) Backgroundmentioning

confidence: 94%

Section: (I) Backgroundmentioning

confidence: 94%

Individual Large Shareholders, Earnings Management, and Capital‐Market Consequences

Dou¹,

Hope²,

Thomas³

et al. 2016

Business Fin & Account

Self Cite

View full text Add to dashboard Cite

show abstract

“…Liquidity can also lead to greater indirect monitoring by increasing the threat of investor exit since lower transaction costs make investors more willing to sell more liquid shares in the event that managerial opportunism is detected (Edmans, 2009;Bharath et al, 2013). For example, Edmans et al (2013) show that as liquidity attracts passive blockholders, operating performance improves, and Dou et al (2015) find that as liquidity-induced threat to exit increases, blockholders have a greater positive impact on firm financial reporting quality. 7…”

Section: (I) Effects Of Liquidity On Managerial Myopiamentioning

confidence: 99%

“…() show that as liquidity attracts passive blockholders, operating performance improves, and Dou et al. () find that as liquidity‐induced threat to exit increases, blockholders have a greater positive impact on firm financial reporting quality…”

Section: Background and Literaturementioning

confidence: 99%

Does Stock Liquidity Affect Accrual‐based Earnings Management?

Huang

Lao²,

McPhee³

2017

Business Fin & Account

View full text Add to dashboard Cite

This study investigates the effects of stock liquidity on earnings management. While prior research finds that liquidity has mixed effects on corporate governance, our baseline regression results show that an increase in stock liquidity is associated with an increase in discretionary accruals and revenues. To establish causality, we use two quasi‐natural experiments that exploit exogenous increases in stock liquidity resulting from regulatory changes to the minimum tick size. The results of our difference‐in‐differences approach indicate that stock liquidity increases accrual‐based earnings management. Additional analysis suggests that liquidity affects earnings management by magnifying the effects of takeover pressure and equity compensation.

show abstract

“…This makes stock prices more informative and exerts a disciplining effect on managers as the blockholders will exit the firm if the manager misbehaves (Edmans & Manso, 2010). We follow Dou, Hope, Thomas, and Zou (2018) and compute blockholder competition as the Herfindahl index of blockholder concentration multiplied by minus one. 9 Higher (lower) blockholder competition indicates better (worse) governance.…”

Section: Corporate Governancementioning

confidence: 99%

Performance peer groups in CEO compensation contracts

Bakke

Mahmudi

Newton

2020

Financial Management

View full text Add to dashboard Cite

How do firms choose performance peer groups used in chief executive officer (CEO) relative performance evaluation contracts? We find that while firms, for the most part, choose performance peers to better identify their CEOs' impact on firm performance, they also tend to select underperforming peers. Dynamically, we find that peers that are added and retained every year are weaker than ones that were not chosen. These findings suggest managers may have some influence on the choice of performance peers. Finally, using a quasi-natural experiment, we find that enhanced disclosure did not affect the tendency of firms to select underperforming peers.

show abstract

Blockholder Exit Threats and Financial Reporting Quality

Cited by 20 publications

References 50 publications

Individual Large Shareholders, Earnings Management, and Capital‐Market Consequences

Individual Large Shareholders, Earnings Management, and Capital‐Market Consequences

Does Stock Liquidity Affect Accrual‐based Earnings Management?

Performance peer groups in CEO compensation contracts

Contact Info

Product

Resources

About