Short selling threats and real earnings management Event as iCalendar

(Graduate School of Management)

18 February 2019

2:45 - 3:45pm

Venue: The University of Auckland Business School, Level 3, Room 317, 12 Grafton Road, Auckland, 1010

Abstract:
A burgeoning stream of research provides evidence that short sale is an invisible hand serving as an external governance mechanism on firms’ financial reporting decisions. Adding to this stream of literature, this paper examines, in an international setting, the effect of short selling on the managers’ real earnings management decision, and firms’ tendency to shift from accrual earnings management to real earnings management driven by short sale.

Using 122,602 firm-year observations drawn from 22 countries over the period of 2003 to 2015, we conduct a batch of empirical tests. We find that short selling threats constrain real earnings management, and this effect is mainly driven by firms operating in countries with weak shareholder protection. The results suggest a substitution between shareholder protection at country level and short selling interest as an alternative monitoring mechanism. In addition, we find strong evidence that firms shift from accrual earnings management to real earnings management when there is an increase in short selling interest of firms’ stocks. Lastly, the results reveal a more pronounced constraining effect of short sale on real earnings management among firms domiciled in the countries where short sale is feasible.

Bio:
Dr Haiyan Jiang is an Associate Professor in Accounting at Waikato Management School, University of Waikato. Haiyan teaches Financial Accounting and Corporate Finance courses and has developed courses for Master of Professional Accounting and Finance and Master of Business programmes.

Haiyan researches in the areas of accounting information quality, capital market, and governance issues. She has a particular passion for international accounting research with a focus on how country-specific factors and regulatory changes shape corporate financial reporting decisions and managerial behaviours. She has published in Journal of International Accounting Research, The British Accounting Review, Accounting Horizons, The International Journal of Accounting, Journal of Contemporary Accounting and Economics and other peer reviewed journals. With her growing engagements with international research communities, she has been invited to present seminars and workshops at overseas universities and is currently an Associate Editor of Journal of International Accounting, Auditing and Taxation (JIAAT) and Accounting Research Journal (ARJ).

For more information contact:
Suvi Nenonen
Email: s.nenonen@auckland.ac.nz 
Ext. 81528