US oil companies’ earnings management in response to hurricanes Katrina and Rita

Byard, Donal; Hossain, Mahmud; Mitra, Santanu

doi:10.1016/j.jaccpubpol.2007.10.006

Cited by 51 publications

(42 citation statements)

References 8 publications

(10 reference statements)

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“…The audit committees' size can influence the amount of workload they can deliver, especially in large and complex firms (Karamanou and Vafeas, 2005). Meeting frequency can be considered as a proxy for the time directors have to perform their duties and for the level of monitoring activity delivered (Carcello et al, 2002;Laksmana, 2008;Greco, 2011 We found 22 companies for the SIC Code 2911 (Han &Wang, 1998 andByard et al, 2007, found 29 firms in the US 2911 Sic Code). We discarded one company with multiple missing balance sheet data.…”

Section: Hp5: There Is a Positive Association Between Ceo Duality Andmentioning

confidence: 93%

“…Prior research studied earnings management in U.S. oil companies in response to the political costs-increasing events, such as the Gulf War or the hurricanes Katrina and Rita (Han & Wang, 1998;Byard et al, 2007). These events produced sudden increases in the oil-based product prices (especially the fuel price), making the oil companies subject to tightened political scrutiny, with risk of potential adverse political actions, such as antitrust, regulation, government subsidies cut, increased taxes (Watts and Zimmerman, 1986).…”

Section: Hp2a: There Is a Positive Association Between Managerial Ownmentioning

confidence: 99%

“…We can interpret the findings in the perspective of the political costs hypothesis. Prior literature found that oil companies reported earnings are politically sensible, especially when related to strikingly high consumer product prices, that is fuel prices (Han&Wang, 1998;Byard et al, 2007). In firms where the government is the controlling shareholders or a large blockholder, managers have probably no incentives in earnings manipulation aimed at avoiding political scrutiny.…”

Section: Models For the Impact Of Ownership Structures And Corporate mentioning

confidence: 99%

“…Prior research studied the earnings management practices of the US petroleum refining firms in response to political costsincreasing events (Han & Wang, 1997;Byard et al, 2007). To the best of our knowledge, there is no prior study investigating the relationship between corporate governance and ownership structure with earnings management in the oil industry.…”

Section: Introductionmentioning

confidence: 99%

“…The use of quarterly data ensures a better appreciation of the EM activity in this specific industry rather than a study of the yearly earnings. The frequent oil price fluctuations are usually "transmitted" to the fuel prices and can have therefore sudden impact on the quarterly earnings (Han & Wang, 1998;Byard et al, 2007).…”

Section: Introductionmentioning

confidence: 99%

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Ownership Structures, Corporate Governance and Earnings Management in the European Oil Industry

Greco

2012

SSRN Journal

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In this paper we investigate the impact of corporate governance and ownership structure variables on earnings management in the European oil industry. We used quarterly data and a panel data methodology. The findings show non-linear relationships among institutional investors ownership and governmental ownership with the magnitude of earnings management. For institutional investors ownership we found a positive association within lower levels of ownership (consistently with the short-term transient view of institutional investors shareholding) and a negative association within higher levels of ownership (consistently with the long-term orientation view of institutional investors, playing a monitoring role over the company's financial performance). For governmental ownership, we found that a positive association within lower levels of ownership, consistently with the incentives for oil companies to avoid closer political scrutiny on the reported results (political costs hypothesis). We found a negative association with earnings management magnitude in firms where governments are the controlling shareholders or a large blockholders. The findings also show that relevant governance variables, such as the proportion of independent directors, the audit committees size and meeting frequency, contribute to constrain earnings management. Overall, the results suggest that key variables related to ownership and governance structures impact on earnings management across different national settings and governance systems. Moreover, the relationship of ownership structures with earnings management appears to be complex and varying at different levels of ownership. This study could have several practical implications. Firstly, accountability and stricter control could be two issues for firms where governments are shareholders that engages in earnings management practices. Secondly, higher participation of institutional investors in the ownership and in the governance may be beneficial may be an effective monitoring device over earnings manipulation. Finally, the homogeneous results could mean that governance practices are more integrated at an European level than the national governance models and codes' recommendations are.

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