scholarly journals The effect of the ownership concentration on earnings management. Empirical evidence from the Italian context

2017 ◽  
Vol 14 (3) ◽  
pp. 236-248 ◽  
Author(s):  
Francesco Grimaldi ◽  
Anna Lucia Muserra
Keyword(s):  
Earnings Management ◽  
Ownership Structure ◽  
Ownership Concentration ◽  
Accounting Fraud ◽  
Policy Makers ◽  
Concentrated Ownership ◽  
Corporate Governance Mechanisms ◽  
The 2008 Financial Crisis ◽  
Italian Context ◽  
Annual Earnings

The numerous cases of business disruptions, involving opportunism and accounting fraud by shareholder, directors and managers, that have occurred in different countries over the past two decades along with institutional and context phenomena and with the rise of the 2008 financial crisis, have refocused the attention of academia, professionals and world policy makers on the disclosure processes used by companies and on corporate governance mechanisms. This paper, after a systematic description of the investigated issues – ownership structure, ownership concentrations and largest shareholders examines the relationship between ownership structure or concentrated ownership and earnings management in the Italian context, characterized by concentrated ownership and the dominance of the largest shareholder who exercises typically significant influences on management decisions directly or indirectly. Existing literature suggests, in an unequivocal way, the effect of the ownership structure on earnings management. According to some researchers, the ownership structure decreases the incentive to manage earnings. Others have the opposite opinion, they think ownership structure on earnings management provides the opportunity and incentive to manipulate earnings. Therefore, the main purpose of this paper is to analyse whether, in the Italian context, a firm’s ownership structure, measured with several variables, exacerbates or alleviates earnings management. Using a sample of 300 non-financial listed Italian firms from 2011 to 2013. We find that discretionary accruals, as a proxy for earnings management, is negatively related to ownership concentration and the second largest shareholder and positively related to first largest shareholder. The study’s results suggest that ownership concentration improve the quality of annual earnings, in a particular agency setting, by reducing the levels of earnings management.

scholarly journals Ownership structure and voluntary disclosure in corporate annual reports of Malaysian listed firms

2011 ◽  
Vol 8 (2) ◽  
pp. 296-312 ◽  
Author(s):  
Poh-Ling Ho ◽  
Gregory Tower
Keyword(s):  
Ownership Structure ◽  
Voluntary Disclosure ◽  
Positive Association ◽  
Institutional Ownership ◽  
Ownership Concentration ◽  
Annual Reports ◽  
Policy Makers ◽  
Listed Firms ◽  
Ownership Structures ◽  
The Impact

This paper examines the impact of ownership structure on the voluntary disclosure in the annual reports of Malaysian listed firms. The result shows that there is an increase in the extent of voluntary disclosure in Malaysian listed firms over the eleven-year period from 1996 to 2006. Ownership concentration consistently shows positive association with voluntary disclosure. Firms with higher foreign and institutional ownership have a significantly positive association with voluntary disclosure levels while firms with family ownership exhibit lower voluntary disclosure. Consistent with agency theory, different ownership structures have varied monitoring effects on agency costs and clearly influence firm’s disclosure practices. The findings provide insights to policy makers and regulators in their desire to increase transparency and accountability amidst the continual enhancement of corporate governance. The findings provide evidence that optimized ownership structure in any jurisdiction should be considered in any regulatory process that seeks to improve transparency.

scholarly journals Earnings management, corporate governance, and ownership structure of Philippine initial public offerings

2021 ◽  
Vol 18 (4) ◽  
pp. 175-191
Author(s):  
Angelo O. Burdeos
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Initial Public Offerings ◽  
Ownership Structure ◽  
Stock Exchange ◽  
The Philippines ◽  
Ownership Concentration ◽  
Independent Directors ◽  
Ceo Duality ◽  
Public Offerings

Prior studies examined the effect of corporate governance variables on discretionary current accrual, the most widely used measurement of earnings management. The principal-agent conflict implies that the size of the board, the percent of independent directors, CEO duality, and auditor prestige limit discretionary current accruals (DCA). This paper extends past studies by examining the effect of ownership structure on discretionary current accruals. The study determines the level of income-increasing earnings management of initial public offerings (IPOs) in the Philippines and the factors that explain it. Particularly, the paper examines the effect of ownership concentration and largest shareholder ownership on discretionary current accruals. The study uses a final sample of 105 IPO firms in Philippine Stock Exchange (PSE) from 2008 to 2018. Employing the modified Jones’s (1991) model to measure discretionary current accrual and multiple regression analysis, the study finds -4.19% discretionary current accrual on the average. It also reveals that the 2002 Philippine Code of Corporate Governance (PCCG) is ineffective in curbing earnings management. In addition, there is an insignificant relationship between the size of the board, CEO duality, ownership concentration, largest shareholder ownership and auditor prestige, and earnings management. Furthermore, the paper finds a significant relationship between the percent of independent directors, industry sector, return on assets (ROA) and cash flow from operations and earnings management.

scholarly journals The determinents of accruals based earnings management :case of listed Moroccan companies

2017 ◽  
Vol 6 (1) ◽  
pp. 1
Author(s):  
Sanae Hoummani ◽  
Said Radi
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Discretionary Accruals ◽  
The Other ◽  
Growth Opportunities ◽  
Negative Relation ◽  
Empirical Results ◽  
Concentrated Ownership ◽  
Corporate Governance Mechanisms ◽  
Effective Role

This article aims to identify the determinants of accruals based earning's management in Moroccan listed companies. On one hand, it examines the relation between discretionary accruals as the measure of earning's management and what literature documents as incentives to this practice, in particular, politico-contractual motivations, the avoidance of losses and earnings decreases and growth opportunities. On the other hand, it investigates whether corporate governance mechanisms may constrain management's opportunistic behaviors. The empirical results provide evidence that managers manipulate earnings in the presence of losses and, that growing firms is more likely to engage in earning's management. In terms of constraining factors, our findings indicate a negative relation between discretionary accruals and both institutional and concentrated ownership. Thus, we suggest that these shareholders play an effective role on monitoring managers.

Ownership Structure and Tax Avoidance: Evidence from Indian SMEs

2020 ◽  
Vol 23 (02) ◽  
pp. 2050012
Author(s):  
Omar Farooq ◽  
Angie Abdel Zaher
Keyword(s):  
Ownership Structure ◽  
Institutional Environment ◽  
Tax Avoidance ◽  
Negative Association ◽  
Ownership Concentration ◽  
Concentrated Ownership ◽  
Enterprise Surveys ◽  
Small Medium Enterprises ◽  
Medium Enterprises ◽  
The Relationship

The paper examines the relationship between ownership concentrations and tax avoidance for small–medium enterprises (SMEs) in India. With a panel dataset built from small- and medium-sized enterprise surveys over the period between 2013 and 2014, we find that SMEs with concentrated ownership have a negative association with tax avoidance. The result is more pronounced for SMEs headquartered in states/provinces with stronger economic and institutional environment. The results also indicate that for any two SMEs with similar levels of ownership concentration, the SME with higher capital needs is more likely to avoid taxes.

Do Corporate Governance Characteristics Affect Non-Financial Risk Disclosure in Government-owned Companies? The Italian Experience

2014 ◽  
pp. 5-31 ◽  
Author(s):  
Alessandra Allini ◽  
Francesca Manes Rossi ◽  
Riccardo Macchioni
Keyword(s):  
Corporate Governance ◽  
Financial Risk ◽  
Ownership Concentration ◽  
Annual Reports ◽  
Risk Disclosure ◽  
Board Diversity ◽  
Policy Makers ◽  
The Public ◽  
Italian Experience ◽  
Corporate Governance Mechanisms

While a considerable amount of research has already been carried out into the corporate governance determinants of non-financial risk disclosure in companies in the private sector, such determinants in the annual reports of listed Governmentowned Companies (LGCs) have yet to be investigated fully. This study attempts to complete the picture. Italian LGCs have been selected for analysis and agency theory has been applied in the public sector under the accountability paradigm. The research investigates whether non-financial risk disclosure provided in the Management Commentary (MC) of Italian LGCs may be affected by ownership concentration, corporate governance mechanisms and company-specific features. The issue is of particular importance in a country where Government intervention has significantly affected its economic development since the nineteenth century. Our findings show that there is a relationship between the level of non-financial risk disclosure and Board diversity, leverage and sector. Our findings also reveal some useful insights concerning policy makers and standard setters.

Debt and ownership structure: evidence from Italy

2016 ◽  
Vol 16 (5) ◽  
pp. 883-905 ◽  
Author(s):  
Fabrizio Rossi ◽  
Richard J. Cebula
Keyword(s):  
Ownership Structure ◽  
Institutional Investors ◽  
Agency Costs ◽  
Generalized Method Of Moments ◽  
Negative Relationship ◽  
Ownership Concentration ◽  
Policy Makers ◽  
Content Type ◽  
Practical Implications

Purpose The purpose of this study is to investigate the relationship between the debt and ownership structure of a sample of Italian-listed companies to measure the role assumed in the control and monitoring of agency costs. Design/methodology/approach This study examines a balanced panel data, using both a random effects model and a generalized method of moments model to better capture any problems related to the endogeneity of the variables in the model. Findings The results provide evidence of a positive relationship between debt and ownership concentration on the one hand and a negative relationship between debt and institutional investors on the other hand. The debt seems to assume both functions, i.e. the disciplinary role of substitute at low levels of ownership concentration and a complementary role at high levels of ownership concentration. Practical implications This study provides three practical implications. The first is that the complementarity between debt and ownership concentration provides evidence of the entrenchment effect and tends to weaken the company financially. Second, the results also provide useful prompts to policy-makers who should encourage the presence of institutional investors. Third, the policy-makers should also encourage the expansion of the stock market to enhance the protection of shareholders, reduce private control benefits and provide Italy the same opportunities as other common and civil law countries to collect risk capital, avoiding the abuse of debt. Originality/value The empirical results suggest that ownership concentration increases the degree of corporate debt, whereas institutional investors assume the disciplinary role of monitoring and controlling agency costs. The results provide evidence of both the entrenchment effect and the alignment-of-interests hypothesis and that the expropriation theory seems to prevail over the control and monitoring role.

CEO COMPENSATION AND FIRM INNOVATION: MODERATING ROLE OF OWNERSHIP CONCENTRATION

2019 ◽  
Vol 24 (06) ◽  
pp. 2050058
Author(s):  
MUHAMMAD ZULFIQAR ◽  
KHALID HUSSAIN
Keyword(s):  
Ownership Structure ◽  
Ceo Compensation ◽  
Stock Exchange ◽  
Panel Data Analysis ◽  
Chinese Economy ◽  
Strategic Decision ◽  
Ownership Concentration ◽  
Firm Innovation ◽  
Concentrated Ownership ◽  
Innovative Culture

A performance-based CEO compensation plan can help organisations incorporate an innovative culture. Concentrated ownership structure can enable shareholders to play a key role in the strategic decision-making of a company by exercising their statutory rights. Purpose of this paper is to understand the moderating impact of ownership concentration on the nexus of CEO compensation and firm innovation relationship. Data about all A-share non-financial companies listed at the Shanghai Stock Exchange and Shenzhen Stock Exchange is obtained from CSMAR database of China. Panel data analysis by using year and industry effects indicates that CEO compensation positively and significantly affects organisational innovation. Furthermore, ownership concentration as measured by top 5 shareholders strengthens this relationship. Findings of this study can help investors, policymakers and creditors to understand the importance of CEO compensation towards innovation in the presence of a concentrated ownership structure. Chinese economy is the fastest growing developing economy and therefore, Chinese contextual findings may be selected as a benchmark for other developing countries.

Corporate governance factors as predictors of earnings management

2019 ◽  
Vol 45 (2) ◽  
pp. 71-92
Author(s):  
Pratibha Wasan ◽  
Kalyani Mulchandani
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Information Asymmetry ◽  
Ownership Structure ◽  
Earnings Quality ◽  
Concentrated Ownership ◽  
Developed Markets ◽  
Indian Context ◽  
High Incidence ◽  
Firm Attributes

Unlike developed markets, emerging markets like India have greater imperfections, have information asymmetry, and are particularly different in terms of accounting transparency, corruption, and corporate governance (CG). Also, concentrated ownership structure of Indian firms is more conducive for opportunistic earnings management (EM). There has been high incidence of financial frauds and EM in India particularly through related party transactions. The CG regulations were revised and enhanced in the year 2014 but increasing cases of financial frauds and CG violations indicate insufficiency of CG laws in the country. Linking CG to financial information in a context where investor protection laws are still evolving is important. The contributions of the present study are: first, it assesses earnings quality (EQ) as a key outcome of EM to confirm, in the Indian context, one of the two opposing perspectives of EM, namely opportunistic and informational. Second, it creates empirical evidence on those firm attributes and CG mechanisms which can predict EQ for investors in India. Third, it provides inputs on the effectiveness of the revised regulations in controlling EM, and finally, it puts forward theoretical rationale for EM and CG practices in India.

Ownership Preferences, Competitive Heterogeneity, and Family-Controlled Businesses

2006 ◽  
Vol 19 (2) ◽  
pp. 89-101 ◽  
Author(s):  
David G. Hoopes ◽  
Danny Miller
Keyword(s):  
Competitive Advantage ◽  
Ownership Structure ◽  
Ownership Concentration ◽  
Concentrated Ownership ◽  
Monitoring Costs ◽  
Resources And Capabilities

This article models ownership concentration, owner preferences, and competitive advantage. It argues that ownership structure and owner preferences can give rise to resources and capabilities that increase firm profits. The model is then used to explain how successful family-controlled businesses (FCBs) differ from firms with less concentrated ownership and less successful FCBs. Because of their ownership concentration and reduced monitoring costs, many FCBs will have a resource surplus. That surplus and the tendency toward long-term investment among some FCBs create unique competitive opportunities under conditions we specify.

scholarly journals The impact of ownership structure, financial distress on earnings management: The case of Vietnam

2020 ◽  
Author(s):  
Hung Dang Ngoc ◽  
Dung Tran Manh
Keyword(s):  
Earnings Management ◽  
Ownership Structure ◽  
Financial Distress ◽  
Audit Quality ◽  
Foreign Ownership ◽  
State Ownership ◽  
Ownership Concentration ◽  
Regression Methods ◽  
Study Results ◽  
The Impact

The paper examines the effect of ownership structure on profit management in Vietnam. In this study, we explore how three components of ownership structure - the degree of ownership concentration of managers, foreign ownership ratio and state ownership ratio - affect earnings management. In addition, we also consider whether ownership structure affects profit management during financial constraints.<b> </b>We used REM, FEM, GLS, and GMM regression methods. The study results have shown that ownership structure with foreign ownership has a positive effect on earnings management, whereas one with a proportion of state ownership has a contradicting effect. While the degree of ownership concentration does not affect the profit management, in the context of financial restrictions, the ownership ratio has an impact on the management of earnings. Controllable variables in the model, such as firm size, financial leverage, growth rate, profitability and audit quality, all have an impact on earnings management. The results could, potentially, be the basis to help businesses in restricting earnings management behaviour.

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