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Insider Trading And Incentives To Manage Earnings
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Book Synopsis Insider Trading and Incentives to Manage Earnings by : Messod D. Beneish
Download or read book Insider Trading and Incentives to Manage Earnings written by Messod D. Beneish and published by . This book was released on 2014 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper evaluates two hypotheses about the relation between insider selling and earnings management in periods preceding poor corporate performance. Consistent with our litigation avoidance hypothesis, we provide evidence that managers manage earnings upwards after they have engaged in abnormally high levels of insider selling. In contrast, we find no support for the pump and dump hypothesis of earnings being managed before managers sell their equity. Our findings indicate insider trading provides managers with incentives to subsequently manage earnings upward, to distance their selling from the revelation of bad news and reduce the likelihood of reputation, employment, and litigation losses. We show these incentives co-exist and complement incentives to avoid default in a sample of 462 firms that experience technical default in 1983-1997. Our findings suggest that investors and those with oversight authority (e.g., boards of directors, auditors, and regulators) consider monitoring prior rather than contemporaneous insider-trading activity as a part of their corporate governance practices.
Book Synopsis Insiders' Rule 10b5-1 Plan Sales and Earnings Management by : Stanley Veliotis
Download or read book Insiders' Rule 10b5-1 Plan Sales and Earnings Management written by Stanley Veliotis and published by . This book was released on 2007 with total page 136 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Introduction to Earnings Management by : Malek El Diri
Download or read book Introduction to Earnings Management written by Malek El Diri and published by Springer. This book was released on 2017-08-20 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides researchers and scholars with a comprehensive and up-to-date analysis of earnings management theory and literature. While it raises new questions for future research, the book can be also helpful to other parties who rely on financial reporting in making decisions like regulators, policy makers, shareholders, investors, and gatekeepers e.g., auditors and analysts. The book summarizes the existing literature and provides insight into new areas of research such as the differences between earnings management, fraud, earnings quality, impression management, and expectation management; the trade-off between earnings management activities; the special measures of earnings management; and the classification of earnings management motives based on a comprehensive theoretical framework.
Book Synopsis Insider Trading and Earnings Management by : Thomas Alan Issaevitch
Download or read book Insider Trading and Earnings Management written by Thomas Alan Issaevitch and published by . This book was released on 2008 with total page 230 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Earnings Management by : Joshua Ronen
Download or read book Earnings Management written by Joshua Ronen and published by Springer Science & Business Media. This book was released on 2008-08-06 with total page 587 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?
Book Synopsis Earnings Management and Insider Trading Around Seasoned Equity Offerings by : Loretta Nartekie Baryeh
Download or read book Earnings Management and Insider Trading Around Seasoned Equity Offerings written by Loretta Nartekie Baryeh and published by ProQuest. This book was released on 2000 with total page 88 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Insider Trading and Earnings Management by : Julia Sawicki
Download or read book Insider Trading and Earnings Management written by Julia Sawicki and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the relationship between earnings management and insider trading, specifically investigating whether discretionary accruals are related to insider trading and valuation. We find strong evidence of insiders managing earnings downward when buying and managing earnings upward when selling. On the marginal basis, value (high book-to-market value) firms manage their earnings upward compared to growth (low book-to-market value) firms, consistent with a signaling hypothesis. However the opposite is true on the average basis, consistent with an opportunistic hypothesis.
Book Synopsis Earnings Management to Avoid Negative Earnings Surprises in Periods Following Insider Sales by : Peggy Weber
Download or read book Earnings Management to Avoid Negative Earnings Surprises in Periods Following Insider Sales written by Peggy Weber and published by . This book was released on 2008 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates whether insiders manage earnings in the quarters following their stock sales in order to mitigate earnings shocks. An insider trade followed closely by potentially value-relevant earnings disclosures gives the appearance that the trade was based on foreknowledge of the soon-to-be disclosed information. Because securities laws prohibit such trade insiders have incentives to avoid the appearance that their stock transactions are based on private information. I examine a sample of 18,349 firm quarters that correspond to insider sale or post-sale periods over the period January 1989 through July 2001. I compare properties of earnings for these sample observations to non-sale controls matched on industry, time, size and performance. I find increased levels of abnormal accruals in the periods subsequent to insider sales, and that these positive accruals are associated with analyst forecast errors whose values are indistinguishable from those of matched control firms but whose magnitudes are significantly smaller. This pattern suggests insiders manage earnings in order to distance their sales from negative earnings news consistent with avoidance of the appearance of illegal insider trade.
Book Synopsis The Relation between Incentives to Avoid Debt Covenant Default and Insider Trading by : Messod D. Beneish
Download or read book The Relation between Incentives to Avoid Debt Covenant Default and Insider Trading written by Messod D. Beneish and published by . This book was released on 2014 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use a sample of firms that experience technical default to investigate whether an observable managerial action, managers? trading, is useful in (1) determining the existence of pre-default earnings management, and (2) in assessing whether specific contract modifications in renegotiated debt agreements are costly. We find income-increasing accruals and unexpected accruals in the year preceding the year of default of magnitudes sufficient to forestall default. We show, however, that the significant income-increasing accruals and unexpected accruals occur only in firms in which managers engage in abnormal insider selling. Our evidence suggests that by managing earnings to delay the onset of default, managers sell their equity-contingent wealth at higher prices. Finally, our evidence implies that renegotiated debt provisions?such as additional covenants and restricted borrowing?are costly for firms with greater investment opportunities prior to default.
Book Synopsis Relationship Between Earnings Management and Insider Trading by : Joseph Wong
Download or read book Relationship Between Earnings Management and Insider Trading written by Joseph Wong and published by . This book was released on 1998 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Earnings Management by : Messod D. Beneish
Download or read book Earnings Management written by Messod D. Beneish and published by . This book was released on 2014 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper provides a perspective on earnings management. I begin by addressing the following questions: What is earnings management? How pervasive is it? How is it measured? Then, I discuss what we, as academics, know about incentives to increase and to decrease earnings. The research presented relates to earnings management incentives stemming from regulation, debt and compensation contracts, insider trading and security issuances. I also discuss issues relating to problems in measuring the extent of earnings management and propose extensions for future work.
Book Synopsis Insider Trading, Earnings Management and Information Asymmetry by : Abu Zakir Md Rasel Chowdhury
Download or read book Insider Trading, Earnings Management and Information Asymmetry written by Abu Zakir Md Rasel Chowdhury and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Insider trading is highly tied to earnings management in an asymmetric information environment. Using US data during 2004-2012 and different discretionary accrual measures, we reveal that insiders net purchase ratio dominated by sales, insider purchase ratio and cumulative abnormal return are positively associated with absolute value of earnings management (earnings quality). We also document high earnings management practice in growth firms (low book-to market) than value firms (high book-to market) as well as active involvement of major insiders (e.g. CEO) in such practice for personal benefits. A leading role of information asymmetry and its moderation effect is prevalent. Further evidence also suggests manipulation of earnings for insiders' opportunistic trading over routine trading. Overseeing the earnings management and insider trading behavior simultaneously by the regulators is identified as an important policy issue in this research.
Book Synopsis Earnings Valuation and Insider Trading by : Wen Yu
Download or read book Earnings Valuation and Insider Trading written by Wen Yu and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study explores insider trading as a function of differences between managers' and the market's assessment of company earning components - specifically operating cash flows and accruals. It extends prior research by more comprehensively studying earnings components. It also builds a perspective of managers as sophisticated investors who, while engaging in earnings management, ultimately make insider trading decisions based on the divergence between their private valuation of earnings components and the market's. Thus managers may, seemingly counter-intuitively, engage in income-increasing earnings management and insider buying in the same period. Using 4,357 recent firm - years of observations, we find strong evidence that insider buying, but not selling, behavior is consistent with managerial insider trading based on a market valuation divergence of both operating cash flows and accruals, rather than on either element individually, or on managers' use of accounting discretion. We apply the methodological framework of the Mishkin (1983) test to address the hypothesis above. In particular, we assess the relations involving market pricing and characteristics of company earnings and insider trading as these relate to the fundamental idea of market valuation divergence.
Book Synopsis The Informativeness and Opportunistic Use of Insider Trading by : Jin Jiang
Download or read book The Informativeness and Opportunistic Use of Insider Trading written by Jin Jiang and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation aims to understand how insiders in Asian markets (i.e., China, Hong Kong, Malaysia, Singapore, and South Korea) trade in response to various financial information that are either released by their firms or by third-party, in the framework of agency and signaling theory. This dissertation builds upon three stand-alone papers that explore three different types of accounting settings where financial information is important: (1) auditor opinions, (2) earnings management, and (3) goodwill impairment. The first chapter investigates how insiders trade prior to the issuance of first-time modified audit opinions in an Asian context. I use agency and signaling theoretical frameworks to test the link between insider trading activities and the issuance of different types of modified audit opinions. The second chapter examines whether insiders at politically-connected firms are more likely to manage earnings if they plan to trade stocks after an earnings announcement, compared to insiders at non-connected firms. I use anti-corruption cases involving the ouster of high-level Chinese government officials as a natural experiment setting and adopt difference-in-differences model. The third chapter of my dissertation uses agency and signaling theoretical frameworks to compare insider trading that is informed by impending news of accounting goodwill impairment at firms with positive expectations and at firms with negative expectations regarding prospects in an Asian context.
Book Synopsis Insider Trading Before Accounting Scandals by : Anup Agrawal
Download or read book Insider Trading Before Accounting Scandals written by Anup Agrawal and published by . This book was released on 2015 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine insider trading in a sample of more than 500 firms involved in accounting scandals revealed by earnings-decreasing restatements, and in a control sample of non-restating firms. Managers who sell stock while earnings are misstated potentially commit two crimes, earnings manipulation and insider trading, and their selling increases investor scrutiny and the likelihood of the manipulation being revealed. We examine the purchases, sales and net sales of five groups of corporate insiders during the misstated period and a pre-misstated period, using a difference-in-differences approach. Using several measures of the level of insider trading, we estimate cross-sectional regressions that control for other determinants of the level of insider trading. For the full sample of restating firms, we find weak evidence that top managers of misstating firms sell more stock during the misstated period than during the pre-misstated period, relative to the control sample. But in a number of subsamples where insiders had greater incentives to sell before the revelation of accounting problems, we find strong evidence that top managers of restating firms sell substantially more stock during the misstated period. These findings suggest that managers' desire to sell their stockholdings at inflated prices is a motive for earnings manipulation. Our finding that insiders brazenly trade on a crime for which they are potentially culpable suggests that insider trading is more widespread in the market than has been found in the prior literature.
Book Synopsis Do Investors Trade on the Edge? Evidence From Insider Trading in Vietnam Stock Market by : Khanh Hoang
Download or read book Do Investors Trade on the Edge? Evidence From Insider Trading in Vietnam Stock Market written by Khanh Hoang and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the relationship between insider trading and managerial discretion in the context of the young and fast-growing stock market of Vietnam during the 2006-2017 period. Using alternative estimates of discretionary accruals quality (DACCR) as proxies for managerial discretion, we find that net insider purchase and managerial discretion are negatively associated in the current year, while exhibiting a dynamic inverted U-shaped relation in the preceding year, implying that insider selling behavior is deliberate in long-term and supported by accrual abuse. Interestingly, the results show that net insider purchase is informative about future income-increasing DACCR, but not about future income-decreasing DACCR, suggesting that insiders have consistent incentives to manage earnings upward to engage in preplanned insider selling in the previous period, but not for earnings downward to increase their shareholdings. More importantly, our empirical results reveal that insiders adjust their trading behavior from selling to buying during the two-year period preceding the release of financial information and mislead the market about the prospect of the firm. Consequently, our findings insinuate that under information asymmetry and a poor investor-protection regime, outside investors are likely to trade on the edge.
Book Synopsis Insider Trading by : Moh'd Mahmoud Ajlouni
Download or read book Insider Trading written by Moh'd Mahmoud Ajlouni and published by LAP Lambert Academic Publishing. This book was released on 2013 with total page 400 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book explores the managerial incentive of insider trading by merging two parallels but related tracks: The information contents of insider trading which is a Finance subject backed by the Efficient Market Hypothesis (EMH) and the managerial incentives of insider trading which is a Management subject backed by the Agency Theory. In fact, the managerial incentives of insider trading only becomes testable once there is evidence that insider trading is profitable. In detecting the information contents of insider trading, this book differs in that (1) it employed three signal definitions, (2) it used daily data, (3) it used the security' return index, instead of share prices, (4) it used a most recent set of data, (5) it used the Capital Asset Pricing Model (CAPM) to estimate the expected returns, (6) it reports the results within a shorter event window and (7) it provides, for the first time, empirical evidence on the Executive Share Options (ESO) transactions, in addition to ordinary shares. In terms of the managerial incentive part of this research, a major contribution of this research is that it provides evidence for the first time on the managerial aspects of insider trading.
