ESOPs and earnings management: an empirical note

This study seeks to ascertain the impact of employee stock ownership plans (ESOPs) on earnings management. The empirical evidence shows that firms with larger ESOP ownership exhibit a lower degree of earnings management. I suggest that this is the case because ESOPs motivate employees to monitor management, hence, reducing managerial opportunism in the form of earnings management. Besides, ESOPs may act as a takeover defence and help managers take the long-term view of the firm, thus, lessening the motivation for short-term transient earnings distortion. Finally, there is evidence that ESOP ownership alleviates earnings management only in firms where outside blockholders are present.

Key Supplier Involvement in IT-enabled Operations: When Does it Lead to Improved Performance?

As firms continue to invest in IT resources and collaborate with key suppliers, many fail to benefit from these activities. Drawing on resource orchestration theory and the relational view of interfirm competitive advantage, we examine the contingent relationships among IT resources, key supplier involvement, and the focal firm\u27s performance. Using a multi-informants dataset from the manufacturing sector in China, we find that supplier involvement mediates the positive effect of IT resources on the focal firm\u27s performance only when there is a high level of mutual trust and when competitive intensity is low in the focal firm\u27s environment. In a highly competitive environment, however, mutual trust dampens the positive effect of supplier involvement on the focal firm\u27s performance, which reveals the “hidden costs” of interfirm trust. In contrast, the direct positive effect of IT resources on the focal firm\u27s performance is amplified by mutual trust when competitive intensity is high, suggesting that the focal firm will fare better without supplier involvement under these conditions. Therefore, key supplier involvement in the focal firm\u27s IT-enabled operations does not always lead to improved performance and its effect on performance is contingent on relational and environmental variables

The effect of CEO power on bond ratings and yields

We argue that executives can affect firm outcomes only if they have influence over crucial decisions. This study explores the impact of CEO power or CEO dominance on bond ratings and yield spreads. We find that credit ratings are lower and yield spreads higher for firms whose CEOs have more decision-making power. To further investigate why bondholders are concerned about CEO power, we show that powerful CEOs tend to maintain an opaque information environment. Bondholders demand higher yields because it is difficult for them to monitor managers in firms with powerful CEOs. Taken together, the results suggest that bondholders perceive CEO power as a critical determinant of the cost of bond financing.CEO power Cost of bond financing Agency theory Bondholders

Does founding family control affect earnings management?

Because of concentrated ownership stakes, board composition and longer-investment horizons, founding-family controlled firms provide an interesting setting for examining issues relating to governance and control. Anderson and Reeb (2003a, b, 2004), find that the founding-family controlled structure results in superior stock market and accounting performance and lower cost of debt compared to their nonfamily controlled counterparts. We add to their findings by examining the relationships between founding family control and earnings management. The unique characteristics of family controlled firms could insulate these firms from pressures to manage earnings. Our results support this notion, and find that family firms are significantly less likely to manage earnings.

Staggered Boards, Managerial Entrenchment, and Dividend Policy

Dividends, Classified boards, Staggered boards, Corporate governance, G30, G32, G35,