{"title":"Keeping them honest? Broad-based employee ownership and earnings management","authors":"Colin Birkhead","doi":"10.1111/corg.12554","DOIUrl":null,"url":null,"abstract":"<div>\n \n \n <section>\n \n <h3> Research Question/Issue</h3>\n \n <p>Does broad-based employee ownership limit accrual earnings management?</p>\n </section>\n \n <section>\n \n <h3> Research Findings/Insights</h3>\n \n <p>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.</p>\n </section>\n \n <section>\n \n <h3> Theoretical/Academic Implications</h3>\n \n <p>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.</p>\n </section>\n \n <section>\n \n <h3> Practitioner/Policy Implications</h3>\n \n <p>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.</p>\n </section>\n </div>","PeriodicalId":48209,"journal":{"name":"Corporate Governance-An International Review","volume":"32 3","pages":"500-521"},"PeriodicalIF":4.6000,"publicationDate":"2023-08-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Corporate Governance-An International Review","FirstCategoryId":"91","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/corg.12554","RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS","Score":null,"Total":0}
引用次数: 0
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.
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.