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Birds of a feather flock together: Institutional investors with disciplinary history and financial reporting |
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| Institution: | 1. University of Wisconsin – Whitewater, Department of Accounting, College of Business, Timothy J Hyland Hall 3431, Whitewater, WI 53190, United States;2. Clemson University, School of Accountancy, Wilbur O. and Ann Powers College of Business, 424B Walter T. Cox Blvd., Clemson, SC 29634, United States;3. Clemson University, Department of Finance, Wilbur O. and Ann Powers College of Business, 225 Walter T. Cox Blvd., Clemson, SC 29634, United States;1. University of Huddersfield, Huddersfield Business School, Queensgate, Huddersfield HD1 3DH, UK;2. Heriot-Watt University, Edinburgh Business School, Mary Burton Building, Edinburgh EH14 4AS, UK;1. Auburn University, Harbert College of Business, 301 Lowder Hall, Auburn, AL 36849, United States;2. Kennesaw State University, Coles College of Business, Burruss Building 205, Kennesaw, GA 30188, United States;3. John Carroll University, Boler College of Business, Kramer School of Accountancy and Information Sciences, 6 Bruening Hall, University Heights, OH 44118, United States;1. Faculty of Business and Economics, The University of Hong Kong, Hong Kong, China;2. School of Economics and Management, Harbin Institute of Technology, Shenzhen, China;1. University of Michigan-Flint, Flint, MI, United States;2. Miami University, Oxford, OH, United States;3. University of Memphis, Memphis, TN, United states;4. Old Dominion Unversity, Norfolk, VA, United States |
| Abstract: | This study examines the role of financial misconduct of institutional investors on financial reporting quality of investee firms. We find that the firms held by institutional investors with disciplinary history (IDH) are more likely to engage in financial misreporting. Our results are not driven by institutional investor characteristics such as activism, incentives to monitor, investment horizon, or portfolio size. The impact of IDH is stronger in the firms that are more likely to engage in financial misreporting (i.e., the firms that barely meet analysts’ expectations and with CEOs with higher career concerns). IDH have stronger impact on financial misreporting when the institution reports multiple disciplinary events, the disciplinary event is recent, or disciplinary action is taken against the institutional investor company rather than just its affiliates. Results continue to hold after implementing various statistical tests to address potential endogeneity issues and alternative measures of financial misreporting. |
| Keywords: | Institutional investors Institutional investors with disciplinary history Financial misconduct Financial reporting quality IDH"} {"#name":"keyword" "$":{"id":"k0030"} "$$":[{"#name":"text" "_":"institutional investors with disciplinary history |
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