ESOPs and earnings management

An empirical note

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

This study seeks to ascertain the impact of employee stock ownership plans (ESOPs) on earnings management. The empirical evidence shows that firms with larger ESOP ownership exhibit a lower degree of earnings management. I suggest that this is the case because ESOPs motivate employees to monitor management, hence, reducing managerial opportunism in the form of earnings management. Besides, ESOPs may act as a takeover defence and help managers take the long-term view of the firm, thus, lessening the motivation for short-term transient earnings distortion. Finally, there is evidence that ESOP ownership alleviates earnings management only in firms where outside blockholders are present.

Original languageEnglish (US)
Pages (from-to)287-293
Number of pages7
JournalApplied Financial Economics Letters
Volume3
Issue number5
DOIs
StatePublished - Sep 1 2007

Fingerprint

Ownership
Earnings management
Employees
Empirical evidence
Blockholders
Takeover defenses
Managerial opportunism
Managers

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

@article{05bf47420e91478fa02f4f7f4d30c187,
title = "ESOPs and earnings management: An empirical note",
abstract = "This study seeks to ascertain the impact of employee stock ownership plans (ESOPs) on earnings management. The empirical evidence shows that firms with larger ESOP ownership exhibit a lower degree of earnings management. I suggest that this is the case because ESOPs motivate employees to monitor management, hence, reducing managerial opportunism in the form of earnings management. Besides, ESOPs may act as a takeover defence and help managers take the long-term view of the firm, thus, lessening the motivation for short-term transient earnings distortion. Finally, there is evidence that ESOP ownership alleviates earnings management only in firms where outside blockholders are present.",
author = "Pornsit Jiraporn",
year = "2007",
month = "9",
day = "1",
doi = "10.1080/17446540601118335",
language = "English (US)",
volume = "3",
pages = "287--293",
journal = "Applied Financial Economics Letters",
issn = "1744-6546",
publisher = "Routledge",
number = "5",

}

ESOPs and earnings management : An empirical note. / Jiraporn, Pornsit.

In: Applied Financial Economics Letters, Vol. 3, No. 5, 01.09.2007, p. 287-293.

Research output: Contribution to journalArticle

TY - JOUR

T1 - ESOPs and earnings management

T2 - An empirical note

AU - Jiraporn, Pornsit

PY - 2007/9/1

Y1 - 2007/9/1

N2 - This study seeks to ascertain the impact of employee stock ownership plans (ESOPs) on earnings management. The empirical evidence shows that firms with larger ESOP ownership exhibit a lower degree of earnings management. I suggest that this is the case because ESOPs motivate employees to monitor management, hence, reducing managerial opportunism in the form of earnings management. Besides, ESOPs may act as a takeover defence and help managers take the long-term view of the firm, thus, lessening the motivation for short-term transient earnings distortion. Finally, there is evidence that ESOP ownership alleviates earnings management only in firms where outside blockholders are present.

AB - This study seeks to ascertain the impact of employee stock ownership plans (ESOPs) on earnings management. The empirical evidence shows that firms with larger ESOP ownership exhibit a lower degree of earnings management. I suggest that this is the case because ESOPs motivate employees to monitor management, hence, reducing managerial opportunism in the form of earnings management. Besides, ESOPs may act as a takeover defence and help managers take the long-term view of the firm, thus, lessening the motivation for short-term transient earnings distortion. Finally, there is evidence that ESOP ownership alleviates earnings management only in firms where outside blockholders are present.

UR - http://www.scopus.com/inward/record.url?scp=34548591811&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=34548591811&partnerID=8YFLogxK

U2 - 10.1080/17446540601118335

DO - 10.1080/17446540601118335

M3 - Article

VL - 3

SP - 287

EP - 293

JO - Applied Financial Economics Letters

JF - Applied Financial Economics Letters

SN - 1744-6546

IS - 5

ER -