The role of foreign institutional investors in restraining earnings management activities across countries

2018 ◽  
Vol 50 (6) ◽  
pp. 895-922 ◽  
Author(s):  
Ugur Lel
Keyword(s):  
Earnings Management ◽  
Institutional Investors ◽  
Foreign Institutional Investors

scholarly journals Institutional Investors, Earnings Management And Mispricing Of Accruals: Evidence From China

2012 ◽  
Vol 29 (1) ◽  
pp. 275
Author(s):  
Zhen Zeng ◽  
Peiyu Ou ◽  
Bin Li
Keyword(s):  
Earnings Management ◽  
Institutional Investors ◽  
Discretionary Accruals ◽  
Individual Investors ◽  
The Individual ◽  
A Share

This study examines the role of institutional investors in the pricing of normal accruals and discretionary accruals using the firms listed in the Chinese A-share Market. The results show that significant overpricing of discretionary accruals exists for individual investors and institutional investors, suggesting that they are both misled by the earnings management, while institutional investors are associated with significantly less overpricing. With respect to normal accruals, we find there is no evidence that institutional investors misprice normal accruals, while the individual investors overprice normal accruals. Our results suggest that institutional investors superiority in mitigating the mispricing of total accruals is mainly due to their accurate pricing of normal accruals, and the reason why institutional investors cannot fully eliminate mispricing of accruals is that they are partly misled by earnings management.

Earnings Management and Institutional Ownership in Turkey

2018 ◽  
pp. 252-272
Author(s):  
Aslı Aybars ◽  
Levent Ataünal
Keyword(s):  
Earnings Management ◽  
Institutional Investors ◽  
Management Practices ◽  
Reporting Quality ◽  
Institutional Ownership ◽  
External Control ◽  
Corporate Managers ◽  
Opportunistic Management

Earnings management is an important factor that considerably affects the reporting quality of firms and conceivably results in suboptimal investor decisions. The presence of active institutional investors among the equity holders is generally accepted as an external control mechanism that moderates earnings management problems. This chapter aimed to evaluate the role of institutional investors on earnings management with a data of firms listed on Borsa Istanbul between 2005 and 2011. The study found a significant and negative relation between institutional ownership level and managerial discretion exercised in opportunistic management of accruals and confirmed the substantial role played by institutional investors in monitoring and disciplining corporate managers. In other words, the managers' tendency for earnings management practices is observed to be mitigated by institutional shareholdings.

Foreign institutional investors and the contribution of cash and dividend to firm's value

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Saima Karim ◽  
Muhammad Ilyas
Keyword(s):  
Institutional Investors ◽  
Design Methodology ◽  
Stock Exchange ◽  
Cash Holdings ◽  
Agency Cost ◽  
Content Type ◽  
Managerial Agency ◽  
Foreign Institutional Investors ◽  
Nonfinancial Firms

PurposeThe aim of this study is to investigate the effect of foreign institutional investors (FII) on the contribution of cash and dividend to firm's value in the context of Japan.Design/methodology/approachThis study used a sample of 1,929 nonfinancial firms listed in Tokyo Stock Exchange in the period from 2002 to 2016. For data analysis, pooled OLS regression with firm and year fixed effect is applied. Further, the p-value of difference is used to test the null hypothesis of equal coefficients.FindingsThe findings depict that cash holdings contribute more to firm's value when ownership by FII is high. Contrarily, dividends contribute more to firm's value when ownership by FII is low. The results remain consistent after using excess cash holdings instead of cash holdings and after re-estimating the main regression model in the presence of top 30% and bottom 30% ownership level.Research limitations/implicationsThis study is limited to Japanese nonfinancial sector. The results implied that firms where the probability of managerial agency cost and expropriation of cash is high, the presence of FII mitigates the agency cost and positively influences the contribution of cash to firm's value. Overall, this research highlighted the disciplinary and monitoring role of FII in Japan.Originality/valueThis study provides new insights on the monitoring and governance role of foreign institutions, showing that FII promote better cash management and utilization, which significantly affects the contribution of cash holdings to firm's value.

scholarly journals Earnings quality, foreign investor and dividends

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jong Hwa Lee
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Institutional Investors ◽  
Earnings Quality ◽  
Foreign Ownership ◽  
Foreign Investor ◽  
Foreign Institutional Investors ◽  
Dividend Increases

This study discovers the relation between corporate governance factors and earnings quality and finds that increases in dividends and foreign ownership deter earnings management. The author shows that dividend increases and foreign ownership enhance earnings quality, but they appear to be substitutes in that role. In other words, as foreign ownership increases, the influence of dividends in increasing earnings quality decreases. Improving transparency through dividend increases and monitoring by foreign institutional investors are substitutes in preventing earnings management.

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