Graduation Semester and Year
2020
Language
English
Document Type
Dissertation
Degree Name
Doctor of Philosophy in Accounting
Department
Finance
First Advisor
Li-Chin Jennifer Ho
Second Advisor
Stephanie Jean Rasmussen
Abstract
The association between investor sentiment and corporate reporting decisions/outcomes has been recently examined in the accounting and finance literature. As an important outcome of corporate reporting decisions, earnings management (EM) may be affected by investor sentiment. In this dissertation, I examine two research questions. The first is whether investor sentiment is associated with the propensity of firms’ engaging in the two primary forms of EM: accrual earnings management (AEM) and real earnings management (REM). The second question is whether firms’ internal governance strength and external audit quality would moderate the association between investor sentiment and AEM as well as REM. For the first research question, the results are mixed depending on the proxy of investor sentiment. Specifically, when Michigan Consumer Confidence Index is used as the sentiment proxy, I find a significant and positive association between investor sentiment and the propensity of (1) AEM, (2) the overall measure of REM, and (3) the specific REM mechanism through accelerating sales. However, when investor sentiment is proxied by the index developed by Baker and Wurgler (2006), I find no relation with the propensity of AEM and only a positive association with the propensity of REM through accelerating sales. Regarding the second research question, I find no evidence that either the strength of internal corporate governance mechanisms or quality of external auditors affect the association between investor sentiment and AEM. In terms of REM, the evidence is also mixed depending on which sentiment proxy is used.
Keywords
Investor sentiment, Earnings management, Corporate governance, Audit quality
Disciplines
Business | Finance and Financial Management | Real Estate
License
This work is licensed under a Creative Commons Attribution-NonCommercial-Share Alike 4.0 International License.
Recommended Citation
Chen, Lin, "THE EFFECT OF INVESTOR SENTIMENT ON EARNINGS MANAGEMENT" (2020). Finance and Real Estate Dissertations. 57.
https://mavmatrix.uta.edu/financerealestate_dissertations/57
Comments
Degree granted by The University of Texas at Arlington