| Chapter 1 examines equity analysts' influence on managers' earnings management decisions. Do analysts serve as external monitors to managers, or do they put excessive pressure on managers? Using multiple measures of earnings management, I find that firms followed by more analysts manage their earnings less. To address potential endogeneity problem of analyst coverage, I use two instrumental variables that are based on change in broker size and on firm's inclusion in the S&P 500 index, and find that the result is robust. In addition, given the size of coverage, analysts from top brokers and more experienced analysts have stronger effect against earnings management. The effect is also stronger for female analysts, who are likely to be more effective monitors for being outsiders of male-dominated corporate community.;Chapter 2 studies the relationship between different corporate governance mechanisms and earnings management. I examine two categories of governance devices: internal (ownership concentration and board structure) and external (take-over pressure and institutional ownership). Controlling for other characteristics, I find that firms with stronger internal governance, such as higher ownership concentration and smaller board, manage earnings more, while firms with stronger external governance, such as higher institutional holdings and higher takeover pressure, manage earnings less. The evidence suggests that earnings management is not mainly driven by the conflict between ownership and control but by the conflict between insiders and outsiders. |
