Do Foreign Institutional Investors have a Trade-off between Curbing Real and Accrual Earnings Management?2020-01-06 16:05

Time: 12:00-13:00, 7th Jan. 2020

Venue: Tongji Building BlockA Room 505

Speaker: Zhe An (Senior Lecturer, Monash University )

Abstract: This paper investigates whether foreign institutional investors face a trade-off in curbing real and accrual earnings management. Employing a large sample of 46,350 firm-year observations from 35 countries from 2000 to 2013, we find that foreign institutional ownership (FIO) is negatively associated with firms’ real earnings management but unrelated to their accrual earnings management. We demonstrate this association using the instrumental variable approach and difference-in-differences estimation to exploit the exogenous variation in FIO generated by the inclusion of MSCI membership and the passage of the JGTRRA. Overall, this paper highlights the important role of FIO in curbing managerial misreporting behavior.

Speaker’s Bio: Zhe An is a Senior Lecturer in the Department of Banking and Finance. Zhe An completed his PhD in Finance at the University of New South Wales and joined Monash University in 2015. His research focuses on empirical international corporate finance, in particular, institutional environments, capital structure, crash risk, and mergers and acquisitions. His research papers are published in Journal of International Business Studies, Journal of Corporate Finance, and Journal of Banking and Finance. He received the Dean’s Award for Excellence in Research by an Early Career Researcher at Monash Business School in 2018.