Thesis
Earnings management, stakeholders and the impact of competition and political representation
- Creator
- Rights statement
- Awarding institution
- University of Strathclyde
- Date of award
- 2023
- Thesis identifier
- T17416
- Person Identifier (Local)
- 201779956
- Qualification Level
- Qualification Name
- Department, School or Faculty
- Abstract
- This PhD thesis is comprised of three individual research papers, examinesissues around earnings management and its implications for firms andstakeholders, and provides new insights on factors that drive or mitigate theaccounting practice of earnings management. In the second chapter, I examinewhether earnings management and managerial overconfidence are factors thataffect the relationship of the firm with its customers and employees.Furthermore, I examine the incremental effect of managerial overconfidenceon the association between earnings management and stakeholderrelationships, focusing on customers and employees. I find that both earningsmanagement and managerial overconfidence improve the relationship betweenthe firm and its customers, while I find some evidence that they deteriorate therelationship of the firm with its employees. I do not find evidence to suggestthat managerial overconfidence acts as a factor amplifying the associationbetween earnings management stakeholder relationships. The results remainconsistent in various robustness tests, including alternative measures,instrumental variable regressions, and difference in differences approach. Inthe third chapter, I assess whether product market competition amplifies thenegative relationship between ESG and earnings management. ESGengagement on its own is effective in mitigating earnings management.However, engagement in ESG practices is more important in limiting earningsmanagement by the firm when competition is high. Disclosing ESG relatedinformation, irrespective of the actual ESG performance of the firm, alsoreduces earnings management when competition is high as managersvoluntarily provide more information about the firm’s operations. In the fourthchapter, I assess whether political representation amplifies the negativerelationship between ESG engagement and earnings management. I find thatwhen Democrats are in power as elected state governors, ESG engagement iseffective in mitigating earnings management, as the Democratic party placesmore emphasis on ESG policies. A one standard deviation increase in ESGscore leads to a 0.79% reduction in firms’ earnings management when Democrats are in power. Moreover, engagement in ESG practices is a better hedge against earnings management for firms incorporated in states with governors from the Democratic party compared to Republican states. Results remain consistent when using the control of the Senate suggesting that political representation has a persistent effect on ESG practices across different government levels.
- Advisor / supervisor
- Paudyal, Krishna
- Andriosopoulos, Dimitris
- Resource Type
- DOI
- Date Created
- 2022
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