Takeover Threats, Job Security Concerns, and Earnings Management

The market for corporate control is widely regarded, at least theoretically, as an important corporate governance mechanism for aligning the interests of managers and shareholders of a firm. A healthy takeover market can also help countries attract domestic and foreign capital to their stock markets, increase the global standing of their economies, and strengthen protections for minority shareholders. In a recent article, I examine how takeover laws enacted in 13 countries between 1995 and 2004 affect managers’ decisions about financial reporting. I find that such laws can lead to more earnings management and financial reporting opacity by making managers fearful … Read more