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Equity incentives and earnings management : evidence from the banking industry by Qiang Cheng, Terry Warfield and Minlei Ye

By: Contributor(s): Material type: TextTextSeries: The Vincent C. Ross Institute of Accounting Research ; Volume 26, number 2,Thousand Oaks, CA: Sage Publications; 2011Content type:
  • text
Media type:
  • unmediated
Carrier type:
  • volume
Subject(s): Online resources: Summary: 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 chief executive officers’ 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 minimums required by regulators. This finding indicates that, in the banking industry, potential regulatory intervention induces, rather than mitigates, earnings management arising from equity incentives.
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Item type Current library Call number Vol info Copy number Status Notes Date due Barcode
Journal Article Journal Article Main Library - Special Collections HF5601 JOU (Browse shelf(Opens below)) Vol. 26, no. 2 (pages 317 - 350) SP9786 Not for loan For in-house use only

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 chief executive officers’ 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 minimums required by regulators. This finding indicates that, in the banking industry, potential regulatory intervention induces, rather than mitigates, earnings management arising from equity incentives.

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