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Stock Market Information and REIT Earnings Management

Stock Market Information and REIT Earnings Management This paper investigates the interaction between stock price movement and REIT earnings management. We examine whether information generated from stock price volatility influences managers' incentives to engage in earnings management. Consistent with the efficient markets hypothesis, we find that suspected earnings-management firms do not appear to be more mispriced than others. In addition, using idiosyncratic volatility as a measure of private information embedded in stock price, we find that negative real earnings management, which allows REITs to circumvent the mandatory dividend payout requirement, is associated with greater information embedded in REIT stock prices. The result implies that information contained in stock price volatility motivates REIT managers to more actively avoid regulatory costs. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Real Estate Research Taylor & Francis

Stock Market Information and REIT Earnings Management

Journal of Real Estate Research , Volume 32 (1): 38 – Jan 1, 2010

Stock Market Information and REIT Earnings Management

Journal of Real Estate Research , Volume 32 (1): 38 – Jan 1, 2010

Abstract

This paper investigates the interaction between stock price movement and REIT earnings management. We examine whether information generated from stock price volatility influences managers' incentives to engage in earnings management. Consistent with the efficient markets hypothesis, we find that suspected earnings-management firms do not appear to be more mispriced than others. In addition, using idiosyncratic volatility as a measure of private information embedded in stock price, we find that negative real earnings management, which allows REITs to circumvent the mandatory dividend payout requirement, is associated with greater information embedded in REIT stock prices. The result implies that information contained in stock price volatility motivates REIT managers to more actively avoid regulatory costs.

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References (51)

Publisher
Taylor & Francis
Copyright
© 2010 American Real Estate Society
ISSN
2691-1175
DOI
10.1080/10835547.2010.12091271
Publisher site
See Article on Publisher Site

Abstract

This paper investigates the interaction between stock price movement and REIT earnings management. We examine whether information generated from stock price volatility influences managers' incentives to engage in earnings management. Consistent with the efficient markets hypothesis, we find that suspected earnings-management firms do not appear to be more mispriced than others. In addition, using idiosyncratic volatility as a measure of private information embedded in stock price, we find that negative real earnings management, which allows REITs to circumvent the mandatory dividend payout requirement, is associated with greater information embedded in REIT stock prices. The result implies that information contained in stock price volatility motivates REIT managers to more actively avoid regulatory costs.

Journal

Journal of Real Estate ResearchTaylor & Francis

Published: Jan 1, 2010

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