Agency Costs of Overvalued Equity and Earnings Management in Companies Listed on WSE

Michał Kałdoński , Tomasz Jewartowski

Abstract

The 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.
Author Michał Kałdoński (WZ / KFP)
Michał Kałdoński,,
- Department of Corporate Finance
, Tomasz Jewartowski (WZ / KFP)
Tomasz Jewartowski,,
- Department of Corporate Finance
Journal seriesEconomics and Business Review, [Poznan University of Economics Review], ISSN 2392-1641, e-ISSN 2450-0097, [1643-5877], (B 15 pkt)
Issue year2017
Vol3 (17)
No1
Pages7-37
Publication size in sheets1.5
Keywords in Englishovervalued equity, e arnings management, agency costs, agency theory, corporate finance, corporate governance
DOIDOI:10.18559/ebr.2017.1.2
URL http://www.ebr.edu.pl/pub/2017_1_7.pdf
Languageen angielski
File
2017_1_7.pdf 337.03 KB
Score (nominal)15
Score sourcejournalList
ScoreMinisterial score = 15.0, 20-03-2020, ArticleFromJournal
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