Recent debates on institutional investors and their impact on corporate managers' accounting decisions have especially centred on the effectiveness of their monitoring role. Previous studies have reported mixed results on this question. This paper empirically examines the influence of institutional investors on earnings management in France. The results show that these investors can move corporate managers away from using discretionary accruals to adjust reported earnings. However, this influence is not systematic. It appears to be released only when managers are noticeably motivated to increase or reduce reported earnings. Otherwise, no statistically significant effect is observed.
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Ramzi Benkraiem (2008) studied this question.
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