Corporate site visits and earnings management

Qi, Zhen; Zhou, Yixiao; Chen, Jian

doi:10.1016/j.jaccpubpol.2021.106823

Cited by 42 publications

(31 citation statements)

References 23 publications

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“…Such visiting and communicating opportunities facilitated via CSVs are XIAO expected to prohibit both over-and underinvestment. This is because CSVs enable the improvement of corporate financial disclosure quality and information environment (e.g., Cheng et al, 2016;Qi et al, 2021); they also allow investors to monitor and supervise managerial behaviors more effectively (e.g., Broadstock & Chen, 2021;Jiang & Yuan, 2018). This incremental disclosure and monitoring mechanism mitigate agency costs and compel corporate managers to pay greater attention to their duties instead of manipulating corporate risk-taking strategies for their own benefit (e.g., Cheng et al, 2016;Cheng et al, 2019).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Institutional investors' corporate site visits and corporate investment efficiency

Xiao

2022

Int Rev Finance

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This study examines the association between institutional investors' corporate site visits (CSVs) and the visited firms' investment efficiency. Using unique CSVs' data from China, this study provides empirical evidence that institutional investors' CSVs lessen the visited firms' corporate investment inefficiency, including both over-and underinvestment. The negative relationship between CSVs and investment inefficiency is less pronounced for firms with higher quality financial reporting and better corporate governance. In addition, CSVs show a decrease in corporate overinvestment by monitoring the risk-taking activities of younger CEOs and expansionary firms, and supervising the use of excess free cash flows. Meanwhile, CSVs could mitigate underinvestment by reducing managerial shirking from entrenched CEOs, such as dual or longer-tenured CEOs.The possible economic mechanism behind this association is that CSVs increase institutional shareholding percentages.All the main findings are robust to a battery of endogeneity and robustness tests.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Institutional investors' corporate site visits and corporate investment efficiency

Xiao

2022

Int Rev Finance

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“…Benefits include the reduction in agency conflicts between firm agents and owners, whereas cost includes bankruptcy potentials. Qi et al (2021) agency problems can diminish by dampening asymmetric information issues, a major factor leading to EM practices. Additionally, positive accounting theory has shown the primary incentives for EM, such as compensation contract of management, political costs, and debt covenants.…”

Section: Introductionmentioning

confidence: 99%

The Interplay of Leverage, Financing Constraints and Real Earnings Management: A Panel Data Approach

Hussain

Akbar

Khan

et al. 2022

Risks

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Organizations are formed to gain long-term benefits. However, sometimes myopic management for feigned value enhancement led to the early demise of the firm. Further, to the best of our knowledge empirical role of financing constraints has not yet been explored between the relationship of leverage and earnings management practices. Therefore, the present study aims to empirically examine the impact of leverage on Real Earnings Management (REM) practices and how financing constraints influence this association. Employs a panel dataset of 3250 non-financial Chinese listed firms for a time period spanning from 2009 to 2018. Leverage is categorized into short-term, long-term, and total leverage to check the individual effects of each leverage category on REM practices. The data were analyzed through panel data fixed-effects and random-effects techniques as an econometric approach. First, consistent with positive accounting theory, the impact of total leverage on REM is positive. Second, compared to the long-term leverage, short-term leverage has more pronounced effects on managers’ opportunistic behavior towards using REM. Third, the influence of total leverage is higher (lower) on REM practices in financially unconstrained (constrained) firms. Fourth, the influence of short-term leverage on REM practices compared to long-term leverage is also weak in the financially constrained firms. These findings imply that, to avoid the consequences of managerial myopia, investors should abstain to invest in the firms that use higher amount of short-term debt and are financially unconstrained. This study is the first research to examine the impact of different leverage categories on REM practices in an emerging market, i.e., China, where the legal and financial structure is much poor.

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“…Prior research on financial reporting quality mainly focuses on analyzing firm characteristics (e.g., DeFond & Jiambalvo, 1994) and corporate governance characteristics (e.g., Balsam et al, 2003;Chiu et al, 2013) as determinants of financial reporting quality. Limited prior studies have investigated whether selective access events influence financial reporting quality (Broadstock et al, 2022;Qi et al, 2021). Qi et al (2021) examine a sample of firms listed on SZSE for the 2013-2015 period and find a negative association between corporate site visits and accrual-based earnings management.…”

Section: Introductionmentioning

confidence: 99%

“…Limited prior studies have investigated whether selective access events influence financial reporting quality (Broadstock et al, 2022;Qi et al, 2021). Qi et al (2021) examine a sample of firms listed on SZSE for the 2013-2015 period and find a negative association between corporate site visits and accrual-based earnings management. With a sample of Chinese firms listed on SZSE during the 2009-2016 period, Broadstock et al (2022) show that site visits are negatively related to real earnings management.…”

Section: Introductionmentioning

confidence: 99%

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Corporate site visits and financial report quality

Dao

Sun

2022

J Corp Accounting Finance

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This study examines the association between corporate site visits and visited firms’ financial reporting quality. Using a sample of publicly listed firms in China for the years 2009 through 2018 and four different measures of financial reporting quality, we find that firms receiving more site visits have higher financial reporting quality. Specifically, we find that corporate site visits are associated with a lower level of accrual‐based earnings management and a lower likelihood of financial violations and financial restatements. Moreover, we document a positive association between corporate site visits and the evaluation of earnings disclosure quality. We also find some evidence that the positive association between site visits and financial reporting quality is more pronounced among firms with greater institutional ownership and among state‐owned enterprises. Taken together, our findings underscore the monitoring role of corporate site visits in enhancing visited firms’ financial reporting quality. This research could be of interest to regulators and institutional investors by providing insight into assessing the benefits of selective access events that may influence the quality of financial reports.

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Corporate site visits and earnings management

Cited by 42 publications

References 23 publications

Institutional investors' corporate site visits and corporate investment efficiency

Institutional investors' corporate site visits and corporate investment efficiency

The Interplay of Leverage, Financing Constraints and Real Earnings Management: A Panel Data Approach

Corporate site visits and financial report quality

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