Peer Pressure in Corporate Earnings Management

Item Type Monograph (Working Paper)
Abstract We show that peer firms play an important role in shaping corporate earnings management de-cisions. To overcome identification issues in isolating peer effects, we use fund flow-induced selling pressure by passive open-end equity mutual funds as exogenous shocks to firms’ stock prices. Managers respond to such exogenous price shocks by adjusting earnings management policies. We then measure individual firms’ reactions to changes in earnings management at peer firms as a result of such exogenous price shocks. The documented peer effect in earnings management is not only statistically, but also economically significant. Our results are robust to alternative measures of fund flow-induced selling pressure and earnings management, and to estimating instrumental variables regressions in which we instrument peer firms’ earnings man-agement with mutual fund flow-induced selling pressure.
Authors Charles, Constantin; Schmid, Markus & von Meyerinck, Felix
Subjects business studies
HSG Classification contribution to scientific community
Date 2017
Contact Email Address
Depositing User Beatrix Kobelt-Glock
Date Deposited 03 Apr 2017 13:56
Last Modified 19 Mar 2023 01:24


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Charles, Constantin; Schmid, Markus & von Meyerinck, Felix: Peer Pressure in Corporate Earnings Management. , 2017,

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