EARNINGS MANAGEMENT AND MAIN BANK RELATIONSHIP: EVIDENCE FROM JAPAN

Hideaki Sakawa ； Naoki Watanabel ； Akihiro Yamada

《Advances in Quantitative Analysis of Finance and Accounting》 15期 (2017/12) Pp. 53-78

https://doi.org/10.6293/AQAFA.201712_15.0003

摘要

From the view of agency problem, some monitoring mechanisms are represented as shareholders and the other stakeholders like lenders. The features of monitoring mechanisms are different among different countries. In countries with systems of dispersed ownership structure such as the US, the largest block shareholders would take a monitoring role to prevent opportunistic earnings management. On the other hand, Japan is one of the largest countries which have features of a concentrated and long-term ownership structure that differ from those of Anglo-Saxon countries. There still remains an empirical question about the relation between Japanese corporate governance and to prevent managerial opportunistic behavior. The effectiveness of monitoring roles has been criticized by corporate governance failures. However, few studies investigate whether or not main banks are effective monitors for earnings management. This paper investigates whether or not main bank systems are effective for mitigating client firms' earnings management behavior in Japan. Although Japanese traditional corporate governance mechanisms are known as relational or bank-dominated systems, its foreign ownership has increased since 1990s. In the transition era of corporate governance, there remains a question that who is the effective gatekeeper to decrease earnings management in Japan. We find that earnings management in firms with main bank relationships tend to be mitigated, compared with firms without them. In addition, foreign shareholdings effectively help to mitigate earnings management. This implies that main bank systems function as effective gatekeepers under bank-dominated systems and would be expected for substituting roles of the Anglo-Saxon system.

關鍵字

Earnings Management ； Main Bank Monitoring ； Transition ； Corporate Governance

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