Translated Titles

Can Prospect Theory and Investor Protection Explain Banks' Incentives to Manage Earnings? New Evidence Across 48 Countries




沈中華(Chung-Hua Shen);池祥麟(Hsiang-Lin Chih )

Key Words

銀行 ; 盈餘管理 ; 投資人保護 ; 展望理論 ; 行為財務學 ; 企業治理 ; Bank ; Earnings management ; Investor protection ; Prospect theory ; Behavioral finance ; Corporate governance



Volume or Term/Year and Month of Publication

31卷3期(2003 / 09 / 01)

Page #

407 - 458

Content Language


Chinese Abstract


English Abstract

Due to its highly regulated characteristics, the extent and motives of the earnings management on the banking industry may be distinct. The paper first examines the extent to manage earnings to exceed each of two thresholds: zero earnings and zero earnings changes. Then we test whether the prospect theory can explain these behavioral thresholds for earnings management. Third, if the extents to manage earnings differ across countries, can it be explained by the varied degree of the investor protection across these countries? To test these hypotheses, we examine the properties of reported earnings of the banking industry for 47,206 firm-years between 1993 and 1999 across 48 countries. Our results demonstrate the significant evidence of the earnings management across countries, which appears to be strongly driven by the prospect theory. And we find that the earnings management decreases in outside investor rights, accounting disclosure, and the quality of inside trading. But it is striking that higher law enforcement contrarily results in more earnings management and thus possibly lower quality of financial reports of the banking industry.

Topic Category 社會科學 > 經濟學
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