THE INFLUENCE OF INFORMATION ASYMMETRY ON EARNINGS MANAGEMENT PRACTICE AND THEIR IMPLICATION ON SHARE PRICE CHANGES
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Date
2008
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Universitas Widyatama
Abstract
The research conducted an empirical investigation on the influence of information asymmetry on earnings management and their implication on share price changes. When information asymmetry is high, the stakeholders do not have any information or resources to monitor and to know manager’s activities, which then usually raise the earnings management practice.
To provide evidence on earnings management practice and information asymmetry, this research used aggregate accrual with modified Jones model and market microstructure theory.
This research employed quotes, trading volume, and return volatility for bid ask spread to proxy in market structure and used control variables for complete analysis. We employed multiple regressions with 34 firms’ balanced data in the 2003-2005 periods. Empirical result suggested that independent variables have influence on earnings management, and they correlated with share price changes.
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Keywords
information asymmetry, earnings management, share price changes