Corporate ownership concentration and financial reporting quality

Abstract

Purpose The purpose of this study is to investigate whether a country’s ownership concentration affects the financial reporting quality in a cross-country setting. Design/methodology/approach This paper uses six accounting and auditing indicators to construct a comprehensive index to measure the country-level financial reporting quality. Findings The authors find a non-linear nature of the relationship between the national financial reporting quality and national ownership structure. Specifically, the relation is negative in a relatively spread ownership structure with no controlling shareholders, implying the entrenchment effects dominate. When ownership is highly concentrated, particularly with controlling shareholders whose interest is aligned with that of the firm, the relation turns to positive and alignment effects dominate. Originality/value The study is an important extension of prior research examining the financial reporting quality effect of ownership concentration. It enhances the understanding of the role of ownership concentration in determining a country’s financial reporting quality and has potential important policy implications for countries’ reformers and regulators who are concerned with the transparency of financial reporting and the quality of corporate governance.

The Role of Biological Assets Disclosure in Agricultural Companies: A Study in Indonesia

“…Meanwhile, profitability is the company's ability to earn a profit through all existing capabilities and resources [45]. [46] assessed profitability with the asset turnover ratio (ROA) as follows:…”

“…Moreover, leverage is a ratio that measures how much a company uses financing that comes from debt [47]. According to [46], the leverage value is measured by calculating the debt to equity ratio with the following formula:…”

Peran Entrenchment Effect Dari Konsentrasi Kepemilikan Untuk Peningkatan Kualitas Laba

“…Tingkat konsentrasi kepemilikan dihitung berdasarkan nilai median dari tiga pemegang saham. Dasar pengukuran ini mengacu pada penelitian sebelumnya seperti yang dilakukan Abidin et al 2012, Arthur et al (2019), dan Frenkel et al (2020).…”

“…Penelitian ini juga menemukan adanya pengaruh langsung konsentrasi kepemilikan dengan arah hubungan negatif terhadap kualitas laba. Hasil tersebut selaras de ngan penelitian Alzoubi (2016), Arthur et al (2019), dan Yasser et al (2017). Hasil penelitian bertolak belakang dengan penelitian Cheng et al (2015).…”

“…Besarnya kekuasaan yang dimiliki memungkinkan pemegang saham mayoritas bertindak untuk memenuhi kepentingan sendiri, termasuk melakukan manajemen laba. Terkonsentrasinya kepemilikan pada pihak tertentu memicu adanya kesempatan pemegang saham pengendali untuk memutuskan terkait bagaimana distribusi laba bagi seluruh pemegang saham (Arthur et al, 2019;Hapsari et al, 2019). Kesempatan tersebut mendorong pemegang saham pe ngendali untuk termotivasi dalam mengambil seluruh manfaat pemegang saham minoritas (Altaf & Shah, 2018).…”