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Does stakeholder orientation matter for earnings management: Evidence from non-shareholder constituency statutes

Xiaoran Ni

Journal of Corporate Finance, 2020, vol. 62, issue C

Abstract: Using a difference-in-differences methodology, this paper finds that greater stakeholder orientation due to the adoption of non-shareholder constituency statutes, which allow directors to consider non-shareholder stakeholders' interests in decision making, significantly reduces discretionary accruals. The main effect is more pronounced for firms with greater tension between shareholders and stakeholders, and with higher information acquisition costs for the board. Further analysis shows that stakeholder orientation increases the value-relevance of earnings, and curtails real earnings management to some extent. Overall, my findings indicate that improved financial reporting quality can be a specific channel through which stakeholder orientation increases shareholder value.

Keywords: Stakeholder orientation; Non-shareholder constituency statutes; Earnings management (search for similar items in EconPapers)
JEL-codes: G31 G32 G38 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jcorpfin.2020.101606

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