Keeping them honest? Broad-based employee ownership and earnings management

IF 4.6 3区 管理学 Q1 BUSINESS Corporate Governance-An International Review Pub Date : 2023-08-03 DOI:10.1111/corg.12554
Colin Birkhead
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Abstract

Research Question/Issue

Does broad-based employee ownership limit accrual earnings management?

Research Findings/Insights

I run a series of random effect and fixed effect models on a sample of S&P 1500 firms between 2008 and 2019 to show that managers at employee-owned firms manipulate earnings less than managers at nonemployee-owned firms. My findings suggest that employee ownership enhances financial transparency and limits the opportunities for managers to misrepresent firm performance.

Theoretical/Academic Implications

This study develops and tests theory on employee ownership as a form of internal corporate governance. Equity incentives for executives are typically thought to reduce agency costs. The findings here suggest awarding equity incentives broadly, in which the majority of employees receive equity stakes, may be a more effective method of reducing agency costs.

Practitioner/Policy Implications

Earnings management and intentional financial misreporting are often a result of siloed information within firms. Broad-based employee ownership is generally associated with enhanced information flows through greater mutual monitoring and information sharing. Corporate governors interested in reducing managerial malfeasance may find that widely awarding equity to employees is more effective than financially incentivizing individual managers to act in the firm's interests.

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让他们保持诚实?广泛的员工所有权和收益管理
广泛的员工所有权是否限制了应计收益管理?我在2008年至2019年间对标准普尔1500指数成分股公司的样本进行了一系列随机效应和固定效应模型,以表明员工所有制公司的经理操纵收益的程度低于非员工所有制企业的经理。我的研究结果表明,员工所有权提高了财务透明度,并限制了经理歪曲公司业绩的机会。本研究发展并检验了员工所有权作为公司内部治理形式的理论。对高管的股权激励通常被认为可以降低代理成本。研究结果表明,广泛授予股权激励,其中大多数员工获得股权,可能是降低代理成本的更有效方法。盈余管理和故意的财务误报往往是公司内部孤立信息的结果。广泛的员工所有权通常与通过加强相互监控和信息共享来增强信息流有关。对减少管理渎职行为感兴趣的公司董事可能会发现,将股权广泛授予员工比在财务上激励个别经理为公司利益行事更有效。
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来源期刊
CiteScore
7.00
自引率
11.30%
发文量
79
期刊介绍: The mission of Corporate Governance: An International Review is to publish cutting-edge international business research on the phenomena of comparative corporate governance throughout the global economy. Our ultimate goal is a rigorous and relevant global theory of corporate governance. We define corporate governance broadly as the exercise of power over corporate entities so as to increase the value provided to the organization"s various stakeholders, as well as making those stakeholders accountable for acting responsibly with regard to the protection, generation, and distribution of wealth invested in the firm. Because of this broad conceptualization, a wide variety of academic disciplines can contribute to our understanding.
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