Economics and Business Review

ISSN 2392-1641
e-ISSN 2450-0097

Poznań University of Economics - Poland

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Volume 3 (17) Number 1 pp. 7-37

Michał Kałdoński1, Tomasz Jewartowski1

1Poznań University of Economics and Business, Faculty of Management, Department of Corporate Finance, Poznań, Poland

Agency costs of overvalued equity and earnings management in companies listed on WSE

Abstract:

The aim of the paper is to study earnings management activities of companies listed on Warsaw Stock Exchange from the perspective of Jensen’s agency theory of overvalued equity (Jensen, 2005). Specifically, we analyze relations between equity overvaluation and various types of earnings management used by public companies between 2005 and 2015. We provide evidence partially consistent with Jensen’s theory.
Specifically, our study reveals that overvaluation intensifies income-increasing accrual earnings management activities. However, we also find that overvaluation is not followed by real transactions management activities, as opposed to previous studies based on the US market. We provide some evidence that this difference might be driven by external monitoring executed by large institutional investors.

pub/2017_1_7.pdf Full text available in in Adobe Acrobat format:
http://www.ebr.edu.pl/volume17/issue1/2017_1_7.pdf
Keywords: overvalued equity, earnings management, agency costs, agency theory, corporate fi nance, corporate governance

DOI: 10.18559/ebr.2017.1.2

For citation:

MLA Kałdoński, Michał, and Tomasz Jewartowski. "Agency costs of overvalued equity and earnings management in companies listed on WSE." Economics and Business Review EBR 17.1 (2017): 7-37. DOI: 10.18559/ebr.2017.1.2
APA Kałdoński, M., & Jewartowski, T. (2017). Agency costs of overvalued equity and earnings management in companies listed on WSE. Economics and Business Review EBR 17(1), 7-37 DOI: 10.18559/ebr.2017.1.2
ISO 690 KAłDOńSKI, Michał, JEWARTOWSKI, Tomasz. Agency costs of overvalued equity and earnings management in companies listed on WSE. Economics and Business Review EBR, 2017, 17.1: 7-37. DOI: 10.18559/ebr.2017.1.2