Institutional ownership stability and real earnings management

Authors

Hamid Sakaki, The University of Texas Rio Grande Valley
Dave Jackson, The University of Texas Rio Grande Valley
Surendranath Jory

Document Type

Article

Publication Date

7-2016

Abstract

We examine the relationship between institutional ownership stability and real earnings management. Our findings indicate that firms held by more stable institutional owners experience lower real activities manipulation by limiting overproduction. We further examine how the stability in the shareholdings of pressure-sensitive and insensitive institutional investors affect target firms’ use of real earnings management, respectively. Unlike pressure-sensitive institutional investors, the stability in the share ownership of pressure-insensitive institutional investors (i.e., investment advisors, pension funds and endowments) mitigates target firms’ use of real earnings management. Overall, our results are consistent with the view that institutional investors presence acts as a monitor on target firms’ use of real earnings manipulation activities.

Comments

© 2016, Springer Nature. Original published version available at https://doi.org/10.1007/s11156-016-0588-7

Recommended Citation

Sakaki, H., Jackson, D. & Jory, S. Institutional ownership stability and real earnings management. Rev Quant Finan Acc 49, 227–244 (2017). https://doi.org/10.1007/s11156-016-0588-7

First Page

227

Last Page

244

Publication Title

Review of Quantitative Finance and Accounting

DOI

10.1007/s11156-016-0588-7