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    Insider trading restrictions and earnings management

    Garcia-Osma, B. and Scarlat, E. and Shields, Karin (2020) Insider trading restrictions and earnings management. Accounting and Business Research 50 (3), pp. 205-237. ISSN 0001-4788.

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    We study whether firms that voluntarily restrict insider trading have lower incentives for earnings management. Using a large sample of US firms, we measure these restrictions based on the extent to which insider transactions happen shortly after quarterly earnings announcements. We find that the adoption of insider trading restrictions is associated with a reduction of 9.92 percent in absolute discretionary accruals. Our findings are robust to controlling for changes in corporate governance, and we do not find evidence of a substitution effect between accruals and real earnings management, target beating or timeliness of loss recognition. Taken together, our results indicate that the voluntary adoption of blackout periods that limit insider trading improves the quality of financial reporting.


    Item Type: Article
    Additional Information: This is an Accepted Manuscript of an article published by Taylor & Francis, available online at the link above.
    Keyword(s) / Subject(s): insider trading, voluntary insider trading restrictions, earnings management, real earnings management, corporate governance
    School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
    Depositing User: Karin Shields
    Date Deposited: 07 Jan 2020 10:59
    Last Modified: 02 Aug 2023 17:56


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