Institutional investors and bank governance: An international analysis of bank earnings management

Steve M. Miller, Rabih Moussawi, Bin Wang and Tina Yang

Journal of Corporate Finance, 2021, vol. 70, issue C

Abstract: Despite the growing importance of institutional investors in global capital markets and the link between bank earnings management and financial crash risk, little is known about the role of institutional investors in mitigating bank earnings management. We conduct the first international analysis of this issue using a broad sample of banks and institutional investors. We find a negative relation between institutional ownership and bank earnings management, after controlling for the stringency of a country's bank regulations and other relevant bank and country characteristics. Additionally, institutional ownership is more negatively related to earnings management in countries with more-stringent bank disclosure requirements or when ownership is held by domestic rather than foreign institutional investors. Institutional ownership is also more negatively related to earnings management in countries in which insiders extract more private benefits or when ownership is held by institutional blockholders. Our findings have important policy implications regarding institutional investors' engagement with banks.

Keywords: Institutional investors; Earnings management; Banks; Corporate governance; Bank regulations (search for similar items in EconPapers)
JEL-codes: G15 G2 G32 G34 M41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:70:y:2021:i:c:s0929119921001772

DOI: 10.1016/j.jcorpfin.2021.102055

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