Institutional Investors and Bank Governance: An International Analysis of Bank Earnings Management

Authors

Steve M. Miller, University of South Florida
Rabih Moussawi, Villanova University
Bin Wang, Marquette UniversityFollow
Tina Yang, University of South Florida

Document Type

Article

Publication Date

10-2021

Publisher

Elsevier

Source Publication

Journal of Corporate Finance

Source ISSN

0929-1199

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.

Comments

Accepted version. Journal of Corporate Finance, Vol. 70 (October 2021): 102055. DOI. © 2021 Elsevier. Used with permission.

Recommended Citation

Miller, Steve M.; Moussawi, Rabih; Wang, Bin; and Yang, Tina, "Institutional Investors and Bank Governance: An International Analysis of Bank Earnings Management" (2021). Finance Faculty Research and Publications. 143.
https://epublications.marquette.edu/fin_fac/143