Equity Incentives and Earnings Management: Evidence from the Banking Industry
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This article examined the relationship between equity incentives and earnings management in the banking industry and found that bank managers with high equity incentives are more likely to manage earnings, but only when capital ratios are closer to the minimum regulatory capital requirements.Abstract:
We examine the relationship between equity incentives and earnings management in the banking industry. By focusing on this regulated industry and using industry-specific earnings management proxies, we provide evidence on the impact of regulation on earnings management arising from CEOs' equity incentives. We find that bank managers with high equity incentives are more likely to manage earnings, but only when capital ratios are closer to the minimum regulatory capital requirements. This finding indicates that in the banking industry, potential regulatory intervention induces, rather than mitigates, earnings management arising from equity incentives.read more
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Eugene F. Fama,James D. MacBeth +1 more
TL;DR: In this article, the relationship between average return and risk for New York Stock Exchange common stocks was tested using a two-parameter portfolio model and models of market equilibrium derived from the two parameter portfolio model.
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The Structure of Corporate Ownership: Causes and Consequences
Harold Demsetz,Kenneth Lehn +1 more
TL;DR: In this paper, the authors argue that the structure of corporate ownership varies systematically in ways that are consistent with value maximization, and they find no significant relationship between ownership concentration and accounting profit rates for a set of firms.
Book
The effects of bonus schemes on accounting decisions
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CEO Incentives and Earnings Management
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Journal ArticleDOI
Managerial ownership, accounting choices, and informativeness of earnings
TL;DR: In this paper, the authors hypothesize that the level of managerial ownership affects both the informativeness of earnings and the magnitude of discretionary accounting accrual adjustments, and show that managerial ownership is positively associated with earnings' explanatory power for returns and inversely related to the extent and consequences of accounting-based contractual constraints.