Is institutional monitoring time-varying? Evidence from the Korean market

Kyung Soon Kim, Chune Young Chung and Chang Liu

Finance Research Letters, 2020, vol. 32, issue C

Abstract: This study investigates whether the effectiveness of institutional monitoring varies with economic conditions in Korea, an emerging market. We analyze the impact of the institutional trading activities on corporate earnings management. In particular, we examine whether the association between the two varies with the economy's expectation of market growth (based on the prevailing expectations before and after the 2008 financial crisis). The results show that firms with a high intensity of institutional investor trading tend to manage their earnings using accruals. In addition, in a market with low growth prospects, less effective institutional monitoring increases the likelihood of opportunistic earnings reporting by management.

Keywords: Accounting earnings management; Monitoring effectiveness; Short-term investment preference; Market condition; Emerging market (search for similar items in EconPapers)
JEL-codes: G12 G14 G34 M41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:32:y:2020:i:c:s1544612318304719

DOI: 10.1016/j.frl.2018.10.021

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