Article1979

Corporate Control and Managerial Misrepresentation of Firm Performance

79 citations0/0 files storedThe Bell Journal of Economics

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Auditing, Earnings Management, Governance Corporate Finance and Governance Corporate Governance and Financial Management

Abstract

This paper presents two tests of the hypothesis that the managers of management-controlled firms exercise their control over the information contained in annual reports in a manner which may misrepresent firm performance. The first test finds that management-controlled firms have a significantly smaller proportion of years in which the signs of unexpected accounting earnings and unexpected security returns are the same than do owner-controlled firms. The second test finds that the timing of certain accounting policy decisions made by the managers of management-controlled firms is related to the current level of the firm's security return performance.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1933The Modern Corporation and Private Property 1968An Empirical Evaluation of Accounting Income Numbers 1965Mergers and the Market for Corporate Control 1976Capital market seasonality: The case of stock returns 1961The Fundamental Theorem of Exponential Smoothing 1974Capital Market Equilibrium, Information Production, and Selecting Accounting Techniques: Theoretical Framework and Review of Empirical Work 1968The Effect of Separation of Ownership and Control on the Performance of the Large Firm

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