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Earnings Management and Annual General Meetings: The Role of Managerial Entrenchment
Author(s) -
Banko John,
Frye Melissa B.,
Wang Weishen,
Whyte Ann Marie
Publication year - 2013
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12003
Subject(s) - accrual , earnings , earnings management , quarter (canadian coin) , accounting , dissemination , business , perception , economics , psychology , political science , law , archaeology , neuroscience , history
We examine earnings management around the annual general meeting (AGM) and assess the influence of managerial entrenchment. Consistent with prior research, we show positive and statistically significant abnormal returns surrounding AGMs regardless of the level of managerial entrenchment. We find evidence of significant earnings manipulation primarily among entrenched managers. Specifically, they manage abnormal accruals downward two quarters prior to the AGM and significantly increase abnormal accruals in the quarter immediately before the AGM. Our evidence is consistent with AGMs triggering managers to disseminate information in a manner that shapes the market's perception of the firm.