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Investor Attention and Earnings Management around the World
Author(s) -
Jin Justin Y.
Publication year - 2013
Publication title -
accounting perspectives
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.238
H-Index - 17
eISSN - 1911-3838
pISSN - 1911-382X
DOI - 10.1111/1911-3838.12013
Subject(s) - earnings management , business , corporate governance , accounting , earnings , audit , proxy (statistics) , investor protection , earnings response coefficient , finance , machine learning , computer science
This study examines the determinants of earnings management in an international setting using the limited investor attention model of Hirshleifer and Teoh ([Hirshleifer, D., 2003]). The model predicts that investor attention reduces earnings management. I use analyst following, institutional ownership, and Big N auditor choice to proxy for investor attention. I have four key findings. First, I document that financial analysts curb earnings management in U.S. firms but not in non‐U.S. firms. Second, I document that institutional block‐holdings curb earnings management across the world. Third, Big N auditors reduce earnings management in U.S. firms but not in non‐U.S. firms. Fourth, I document that corporate governance mechanisms reduce earnings management in U.S. firms but not in non‐U.S. firms.