Journal article
The relationship between external financing activities and earnings management: Evidence from enterprise risk management
International review of economics & finance, v 58, pp 312-329
Nov 2018
Abstract
This study examines the impact of external financing activities on earnings management decisions and further explores the role of enterprise risk management (ERM) as a potential moderating factor in this association. We find that managers use both real-activities and accrual-based earnings management when engaging in equity financing activities. Moreover, when firms have weaker ERM systems, we find that managers are less likely to use real-activities earnings management in their equity financing efforts. Therefore, our policy-relevant findings suggest that weaker ERM systems can signal poor control mechanisms and attract additional investor scrutiny, thus constraining managers' use of real-activities earnings manipulation to harm long-term firm value.
•Examine the impact of external financing activities on earnings management (EM) of managers using Taiwanese data.•Explore the role of enterprise risk management (ERM) in the relationship between external financing and EM decisions.•Managers prefer to use both real-activities EM and accrual-based EM when engaging in equity financing.•Managers prefer to use real-activities EM in the presence of weaker ERM systems.•Firms with weaker ERM seek equity financing; investors may compensate by constraining managers from real-activities EM.
Metrics
Details
- Title
- The relationship between external financing activities and earnings management: Evidence from enterprise risk management
- Creators
- Teng-Shih Wang - Providence UniversityYi-Mien Lin - National Chung Hsing UniversityEdward M. Werner - Rutgers, The State University of New JerseyHsihui Chang - Drexel University
- Publication Details
- International review of economics & finance, v 58, pp 312-329
- Publisher
- Elsevier
- Grant note
- NSC 101-2410-H-005-027 / Ministry of Science and Technology, Taiwan ROC (https://doi.org/10.13039/501100004663)
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Accounting
- Web of Science ID
- WOS:000452573400021
- Scopus ID
- 2-s2.0-85046771297
- Other Identifier
- 991019169798404721
InCites Highlights
Data related to this publication, from InCites Benchmarking & Analytics tool:
- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance
- Economics