Insider Entrenchment, Board Leadership Structure and Informativeness of Earnings
35 Pages Posted: 26 Mar 2002
Abstract
This paper uses US data to provide evidence regarding the relationship between earnings informativeness and different levels of insider shareholding including insider entrenchment. At medium levels of insider shareholding (convergence of interests e.g., 5 percent and 25 percent), there is a positive association between earnings informativeness and increase in shareholding. At high levels of insider shareholding (insider entrenchment e.g., more than 25 percent), there is a negative association between earnings informativeness and increase in shareholding. In addition, we show that non-CEO duality is viewed by the market as a way of reducing agency costs for insider-entrenched firms. In other words, the association between informativeness of earnings and different levels of insider ownership depends on the board's leadership structure. Finally, we show that there is a negative (positive) association between increase in insider shareholding and discretionary accruals only for firms with CEO duality at medium (high) levels of insider shareholding.
Keywords: insider entrenchment, non-CEO duality, earnings informativeness, interest-alignment, insider shareholding
JEL Classification: M41, G34
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Detecting Earnings Management: A New Approach
By Patricia Dechow, Amy P. Hutton, ...
-
A Review of the Earnings Management Literature and its Implications for Standard Setting
-
Errors in Estimating Accruals: Implications for Empirical Research
By Daniel W. Collins and Paul Hribar
-
The Economic Implications of Corporate Financial Reporting
By John R. Graham, Campbell R. Harvey, ...
-
The Economic Implications of Corporate Financial Reporting
By John R. Graham, Campbell R. Harvey, ...
-
On the Association between Voluntary Disclosure and Earnings Management
By Ron Kasznik
-
Performance Matched Discretionary Accrual Measures
By S.p. Kothari, Andrew J. Leone, ...
-
The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors
By Ilia D. Dichev and Patricia Dechow