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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
Empire building
Earnings management
Issue Date2013
PublisherUniversity of North Carolina.
Citation
The 24th Annual Conference on Financial Economics and Accounting, Kenan-Flagler Business School, University of North Carolina, Chapel Hill, NC., 15-16 November 2013. 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 activities. We propose a reward-punishment intensity (RPI) measure, and show that it is positively related to firm’s subsequent Tobin’s Q. Importantly, we find that firms with higher RPI exhibit less subsequent empire building and earnings management. Furthermore, we show 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 moderate institutional ownership concentration, higher managers’ wealth-performance sensitivity, and higher trading liquidity, which further supports the governance role of the RPI. The results are robust to using a subsample containing firms with reduced institutional ownership and to using two instrumental variables.
DescriptionAccounting Session 1: Earnings Management
The Conference program's website is located at http://areas.kenan-flagler.unc.edu/conferences/2013cfea/Pages/Final%20Schedule.aspx
Persistent Identifierhttp://hdl.handle.net/10722/193328

 

DC FieldValueLanguage
dc.contributor.authorChang, ECen_US
dc.contributor.authorLin, TCen_US
dc.contributor.authorMa, Xen_US
dc.date.accessioned2013-12-20T02:51:34Z-
dc.date.available2013-12-20T02:51:34Z-
dc.date.issued2013en_US
dc.identifier.citationThe 24th Annual Conference on Financial Economics and Accounting, Kenan-Flagler Business School, University of North Carolina, Chapel Hill, NC., 15-16 November 2013.en_US
dc.identifier.urihttp://hdl.handle.net/10722/193328-
dc.descriptionAccounting Session 1: Earnings Management-
dc.descriptionThe Conference program's website is located at http://areas.kenan-flagler.unc.edu/conferences/2013cfea/Pages/Final%20Schedule.aspx-
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 activities. We propose a reward-punishment intensity (RPI) measure, and show that it is positively related to firm’s subsequent Tobin’s Q. Importantly, we find that firms with higher RPI exhibit less subsequent empire building and earnings management. Furthermore, we show 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 moderate institutional ownership concentration, higher managers’ wealth-performance sensitivity, and higher trading liquidity, which further supports the governance role of the RPI. The results are robust to using a subsample containing firms with reduced institutional ownership and to using two instrumental variables.-
dc.languageengen_US
dc.publisherUniversity of North Carolina.-
dc.relation.ispartof4th Annual Conference on Financial Economics and Accounting 2013en_US
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.subjectGovernance through trading-
dc.subjectInstitutional trading-
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.hkuros227059en_US
dc.publisher.placeUnited States-

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