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Conference Paper: Governance through trading: Does institutional trading discipline empire building and earnings management?

TitleGovernance through trading: Does institutional trading discipline empire building and earnings management?
Authors
KeywordsGovernance through trading
Institutional trading
Stock returns
Empire building
Earnings management
Issue Date2013
Citation
The 2013 China International Conference in Finance, Shanghai, China, 10-13 July 2013. How to Cite?
2013年中国金融国际年会, 中国, 上海, 2013年7月10日至13日. How to Cite?
AbstractThis paper empirically identifies an important external corporate governance mechanism through which the institutional trading improves firm values and disciplines managers from conducting value-destroying behaviors. We propose a reward-punishment intensity (RPI) measure based on institutional investors' absolute position changes, and find it is positively associated with firm's future risk-adjusted returns and Tobin's Q. Importantly, we find that firms with higher RPI exhibit less subsequent empire building and earnings management. Our results suggest that the improved firm values can be attributed to the discipline effect of institutional trading on managers, which is in line with the argument of Governance Through Trading'. Furthermore, we find that the exogenous liquidity shock of decimalization augments the governance effect of institutional trading. We also find that the discipline effect is more pronounced for firms with lower institutional ownership concentration, higher stock liquidity, and higher managers' wealth-performance sensitivity, which further supports the governance role of the RPI.
DescriptionSession - Governance, Trading, and Manipulation
The Conference program's website is located at http://www.ccfr.org.cn/cicf2013/enrc.php
Persistent Identifierhttp://hdl.handle.net/10722/191803

 

DC FieldValueLanguage
dc.contributor.authorChang, ECen_US
dc.contributor.authorLin, TCen_US
dc.contributor.authorMa, Xen_US
dc.date.accessioned2013-10-15T07:25:53Z-
dc.date.available2013-10-15T07:25:53Z-
dc.date.issued2013en_US
dc.identifier.citationThe 2013 China International Conference in Finance, Shanghai, China, 10-13 July 2013.en_US
dc.identifier.citation2013年中国金融国际年会, 中国, 上海, 2013年7月10日至13日.-
dc.identifier.urihttp://hdl.handle.net/10722/191803-
dc.descriptionSession - Governance, Trading, and Manipulation-
dc.descriptionThe Conference program's website is located at http://www.ccfr.org.cn/cicf2013/enrc.php-
dc.description.abstractThis paper empirically identifies an important external corporate governance mechanism through which the institutional trading improves firm values and disciplines managers from conducting value-destroying behaviors. We propose a reward-punishment intensity (RPI) measure based on institutional investors' absolute position changes, and find it is positively associated with firm's future risk-adjusted returns and Tobin's Q. Importantly, we find that firms with higher RPI exhibit less subsequent empire building and earnings management. Our results suggest that the improved firm values can be attributed to the discipline effect of institutional trading on managers, which is in line with the argument of Governance Through Trading'. Furthermore, we find that the exogenous liquidity shock of decimalization augments the governance effect of institutional trading. We also find that the discipline effect is more pronounced for firms with lower institutional ownership concentration, higher stock liquidity, and higher managers' wealth-performance sensitivity, which further supports the governance role of the RPI.-
dc.languageengen_US
dc.relation.ispartofChina International Conference in Finance 2013en_US
dc.relation.ispartof2013年中国金融国际年会-
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.subjectGovernance through trading-
dc.subjectInstitutional trading-
dc.subjectStock returns-
dc.subjectEmpire building-
dc.subjectEarnings management-
dc.titleGovernance through trading: Does institutional trading discipline empire building and earnings management?en_US
dc.typeConference_Paperen_US
dc.identifier.emailChang, EC: ecchang@business.hku.hken_US
dc.identifier.emailLin, TC: chunlin@hku.hken_US
dc.identifier.emailMa, X: xrma@business.hku.hken_US
dc.identifier.authorityChang, EC=rp01050en_US
dc.identifier.authorityLin, TC=rp01077en_US
dc.description.naturepostprint-
dc.identifier.hkuros225322en_US
dc.customcontrol.immutablesml 131119-

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