TITLE

Institutional Investors, Earnings Management And Mispricing Of Accruals: Evidence From China

AUTHOR(S)
Zhen Zeng; Peiyu Ou; Bin Li
PUB. DATE
January 2013
SOURCE
Journal of Applied Business Research;Jan/Feb2013, Vol. 29 Issue 1, p275
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
This study examines the role of institutional investors in the pricing of normal accruals and discretionary accruals using the firms listed in the Chinese A-share Market. The results show that significant overpricing of discretionary accruals exists for individual investors and institutional investors, suggesting that they are both misled by the earnings management, while institutional investors are associated with significantly less overpricing. With respect to normal accruals, we find there is no evidence that institutional investors misprice normal accruals, while the individual investors overprice normal accruals. Our results suggest that institutional investors' superiority in mitigating the mispricing of total accruals is mainly due to their accurate pricing of normal accruals, and the reason why institutional investors cannot fully eliminate mispricing of accruals is that they are partly misled by earnings management.
ACCESSION #
86988908

Tags: INSTITUTIONAL investors;  EARNINGS management;  PRICING;  ACCRUAL basis accounting;  DISCRETIONARY income

 

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