Agency Costs of Overvalued Equity and Earnings Management in Companies Listed on WSE
Michał Kałdoński , Tomasz Jewartowski
AbstractThe aim of the paper is to study earnings management activities of companies listed on Warsaw Stock Exchange from the perspective of Jensen's agency theory of overvalued equity (Jensen, 2005). Specifically, we analyze relations between equity overvaluation and various types of earnings management used by public companies between 2005 and 2015. We provide evidence partially consistent with Jensen's theory. Specifically, our study reveals that overvaluation intensifies income-increasing accrual earnings management activities. However, we also find that overvaluation is not followed by real transactions management activities, as opposed to previous studies based on the US market. We provide some evidence that this difference might be driven by external monitoring executed by large institutional investors.
|Journal series||Economics and Business Review, [Poznan University of Economics Review], ISSN 2392-1641, e-ISSN 2450-0097, [1643-5877], (B 15 pkt)|
|Publication size in sheets||1.5|
|Keywords in English||overvalued equity, e arnings management, agency costs, agency theory, corporate finance, corporate governance|
|Score||= 15.0, 20-03-2020, ArticleFromJournal|
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