scholarly journals Influence or Preference? A New Look at Institutional Ownership and Earnings Management

Businesses ◽  
2021 ◽  
Vol 1 (3) ◽  
pp. 151-167
Author(s):  
Jun Wang ◽  
Qijian Wang
Keyword(s):  
Earnings Management ◽  
Institutional Investors ◽  
Investment Decisions ◽  
Institutional Ownership ◽  
Panel Regression ◽  
Negative Relation ◽  
Instrument Variable ◽  
Prior Literature ◽  
New Look

Prior literature finds that earnings management is negatively correlated with institutional ownership. The question is whether institutional investors drive down earnings management of the firms they invest in, or they choose firms with lower earnings management. In this paper, we use the instrument variable design of the Russell 1000 and 2000 indices reconstruction to obtain an exogenous variation in institutional ownership. We find that institutional investors do not drive down earnings management. Instead, institutions choose firms with lower earnings management when they make investment decisions. To further support the preference hypothesis, we add measures of institution preference in the panel regression and find that the negative relation between institutional ownership and earnings management disappears.

scholarly journals Pengaruh Dimensi Pengungkapan Corporate Social Responsibility Terhadap Future Institutional Ownership

2016 ◽  
Vol 17 (1) ◽  
pp. 91
Author(s):  
Rizky Eriandani
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Institutional Investors ◽  
Positive Impact ◽  
Investment Decisions ◽  
Measurement Instrument ◽  
Institutional Ownership ◽  
Manufacturing Companies ◽  
Csr Disclosure ◽  
Corporate Social

<em>Corporate social responsibility practice becomes important subject in company`s activity, because it will affect the company's reputation. Besides, institutional investors likely prefer to invest in companies that have a social responsibility as it is considered to increase the legitimacy and future performance. This study aims to investigate the effect of CSR disclosure on institutional ownership. We use percentages ownership to measure institutional ownership. CSR measurement instrument used in this study adopted a previous research. The instrument comes from research Hackston and Milne, which was adjusted with Bapepam regulation in Indonesia. We also divided CSR disclosures in four sub-dimensions. The samples used in this research were 115 listed agriculture, mining, and manufacturing companies in indonesian Stock Exchange which studied during the years of 2010. Using SPSS 20, The analysis methods of this research used multiple regression analysis. Studies shows that not all dimensions of CSR disclosure effect on institutional ownership. Only product dimensions of CSR disclosures has a significant positive impact on institutional ownership. However, this paper fail to find any significant impact of another CSR dimensions. Thus, our study suggests that the dimensions of the product can affect investment decisions. In contrast, institutional investors have not focused on environment, employee relation, and community activities in investment decisions.</em>

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.

Dividend Tax Clienteles: Evidence from Tax Law Changes

2009 ◽  
Vol 31 (1) ◽  
pp. 1-22 ◽  
Author(s):  
William J. Moser ◽  
Andy Puckett
Keyword(s):  
Institutional Investors ◽  
Dividend Policy ◽  
Strong Support ◽  
Institutional Ownership ◽  
Tax Law ◽  
Sample Period ◽  
Percent Increase ◽  
Prior Literature ◽  
Dividend Tax

ABSTRACT: We investigate institutional investors' preference for dividend-paying stocks following changes in the dividend tax penalty during the sample period from 1987 until 2004. Following prior literature we separate institutions into tax-advantaged and taxable cohorts and find that when the dividend tax penalty is positive, high-dividend firms constitute a significantly larger (smaller) percentage of tax-advantaged (taxable) institutions' portfolios. Multivariate regressions involving institutional ownership levels and changes confirm our initial findings. We estimate (for the median dividend-paying firm) when the dividend tax penalty decreases by 23.3 percent, we expect tax-advantaged (taxable) institutional ownership will decrease by 0.36 percent (increase by 0.25 percent) of a firm's shares outstanding. We find our results are robust for a subsample of firms that do not change their dividend policy. Overall, our paper provides strong support for the existence of institutional dividend tax clienteles.

scholarly journals Institutional Ownership Composition and Earnings Management

2012 ◽  
Vol 15 (04) ◽  
pp. 1250022 ◽  
Author(s):  
Ling Lin ◽  
Pavinee Manowan
Keyword(s):  
Earnings Management ◽  
Institutional Investors ◽  
Institutional Ownership ◽  
High Turnover ◽  
Management Scenario ◽  
Accounting Accruals ◽  
Block Holders ◽  
Ownership Composition ◽  
The Impact ◽  
The Relationship

This paper examines the impact of outside block-holders on earnings management, using discretionary accounting accruals as the measure of earnings management. For the income-decreasing earnings management scenario, we do not find significant results. This may be attributable to the different natures and time horizons of outside block-holders. Since the majority of outside block-holders are institutional investors, we then investigate the relationship between ownership by institutional investors with different natures and earnings management. Specifically, we find a significant positive relationship between ownership by transient institutional investors (holding diversified portfolios with high turnover) and discretionary accounting accruals. However, we do not find a significant relationship between ownership by dedicated institutional investors (holding concentrated portfolios with low turnover) and discretionary accounting accruals. Therefore, due to the differing natures of institutional investors, we may not treat them as a homogeneous group.

scholarly journals Institutional Ownership and Corporate Social Performance: Empirical Evidence from Indonesian Companies

2007 ◽  
Vol 1 (2) ◽  
pp. 334 ◽  
Author(s):  
Hasan Fauzi ◽  
Lois Mahoney ◽  
Azhar Abdul Rahman
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
North American ◽  
Institutional Investors ◽  
Corporate Social Performance ◽  
Positive Impact ◽  
Social Performance ◽  
Investment Decisions ◽  
Institutional Ownership ◽  
Corporate Social

Prior research on the relationships of institutional ownership and corporate social responsibility has focused on North American (U.S. and Canada) and European companies.  With the passage of Indonesian Law No. 40 in 2007, Indonesian companies are now obligated to conduct CSP. As these companies objected to the passage of this law, awareness of how CSP may benefit Indonesian companies in terms of its positive impact on institutional investors needs to be investigated. Thus, this paper examines the relationships of IO and CSP for Indonesian companies. Unfortunately, contrary to the results for North American and European companies, we found no relationships between institutional ownership and corporate social responsibility for Indonesian companies. This finding suggests that most institutional investors do not include CSP as part of their investment decisions.  <br /><br />

scholarly journals The Nonlinear Relation between Institutional Ownership and Environmental, Social and Governance Performance in Emerging Countries

2021 ◽  
Vol 13 (3) ◽  
pp. 1586 ◽  
Author(s):  
Jennifer Martínez-Ferrero ◽  
María-Belén Lozano
Keyword(s):  
Institutional Investors ◽  
Critical Mass ◽  
Institutional Ownership ◽  
Emerging Countries ◽  
Nonlinear Relationship ◽  
Environmental Disclosure ◽  
Significant Percentage ◽  
Nonlinear Relation

This paper examines how the level of institutional ownership affects environmental, social, and governance (ESG) performance in emerging countries by jointly investigating a nonlinear relationship. By examining an international sample composed of 17,318 firm–year observations from the period 2012–18 for 16 emerging countries, our findings reveal that the ESG performance of firms located in emerging countries depends on the level of influential institutional ownership, and displays a U-shaped relation, particularly for environmental disclosure. Institutional investors with low ownership are less likely to promote higher ESG performance in emerging countries, although this effect is attenuated when institutional ownership reaches a significant percentage, constituting a critical mass.

Does Mandatory IFRS Adoption Affect Audit Hours and the Effectiveness to Constrain Earnings Management? Evidence from Italy

2021 ◽  
Author(s):  
Stefano Azzali ◽  
Tatiana Mazza ◽  
Kenneth J. Reichelt ◽  
Dechun Wang
Keyword(s):  
Earnings Management ◽  
Empirical Analysis ◽  
Audit Quality ◽  
Ifrs Adoption ◽  
Hourly Rate ◽  
Prior Literature ◽  
Abnormal Accruals

We examine the effect IFRS adoption has had on audit effort and the effectiveness of greater audit effort on constraining earnings management. While prior studies have examined the costs of IFRS adoption, it is unclear whether IFRS adoption affects audit effort and whether extra audit effort results in higher audit quality. We find that following Italy's adoption of IFRS, audit hours (but not the hourly rate) increased, suggesting that audit effort (in audit hours) increased following IFRS adoption. We then examine whether more audit hours are associated with improved audit quality in the IFRS regime. Consistent with prior literature (Caramanis and Lennox 2008), we find that more audit effort is associated with lower abnormal accruals in the period before IFRS adoption. Interestingly, after Italy adopted IFRS, abnormal accruals are lower, but audit hours were less associated with lower abnormal accruals, implying that more audit hours are needed to constrain earnings management. Collectively, our empirical analysis suggests that while audit effort increased with mandatory IFRS adoption, the effectiveness of audit effort to constrain earnings management decreased.

scholarly journals Impact of Institutional Investment Pattern on Stock Volatility: A Study of BSE-30 Companies

2016 ◽  
Vol 3 (1) ◽  
Author(s):  
Harendra Singh
Keyword(s):  
Institutional Investors ◽  
Institutional Ownership ◽  
Stock Volatility ◽  
Institutional Investment ◽  
Investment Pattern ◽  
Institutional Holdings ◽  
The Mind ◽  
The Impact

<p>There are many studies found in the field of stock volatility and institutional investors. Most of the studies found an inconsistent relationship between volatility and institutional investors. It creates a curiosity in the mind of investor, whether riskier securities attract institutional investors or an increase in institutional holdings results in an increase in volatility.</p><p><br />In this paper we tried to examine the impact of institutional ownership pattern on stock volatility. We have considered BSE-30 companies and taken 5 year data from 1st January 2009 to 1st January 2014. Our result shows that institutional ownership has positive and significant impact on stock volatility.</p>

scholarly journals Determinan Manajemen Laba Perusahaan di Sektor Konsumsi

2019 ◽  
Vol 3 (2) ◽  
pp. 96
Author(s):  
Muhammad Fajri
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Cash Flow ◽  
Institutional Ownership ◽  
Free Cash Flow ◽  
Earning Management ◽  
Managerial Ownership ◽  
Leverage Ratio ◽  
Good Corporate Governance ◽  
The Impact

The aim of this research is to provide empirical evidence on the impact of good corporate governance, free cash flow, and leverage ratio on earnings management. Good corporate governance is measured by audit committee’s size, the proportion of independent commissioners, institutional ownership, and managerial ownership. Discretionary accrual is the proxy of earning management. This research used 28 consumer goods companies listed in Indonesia Stock Exchange from 2016 to 2018. Data were analyzed using panel data with random effect model. Based on the result of analysis concluded that all components of good corporate governance (audit committee’s size, the proportion of independent commissioners, institutional ownership, and managerial ownership), have no significant effect on earnings management, on other hand leverage ratio has a negative effect and no significant on earning management, and free cash flow has a positve and no significant effect on earnings management

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