Three Essays on Corporate Governance and Earnings Management

Abstract

My Ph.D. thesis is composed of three archival working papers that are focused on corporate governance characteristics and earnings management. In the first paper, titled "Overinvestment, subsequent earnings management, and CEO vulnerability", I argue that CEOs investing beyond the optimal level are likely to decrease financial reporting quality to keep up with investors' expectations about investment returns, and that CEOs use overinvestment to decrease their vulnerability inside their firms in the future. In the second paper, which title is "Entrenched managers' usage of earnings management tools", I explore the effects that managerial entrenchment has on earnings management, and the implications that managerial entrenchment is likely to have on subsequent firm operating performance. In the third paper, titled "Compensation mechanisms, accounting choice, and real activities manipulation", I study the associations between a broad set of CEOs' compensation mechanisms and different earnings management tools, such as income smoothing, discretionary accruals, and real activities manipulation.