Institutional ownership stability and real earnings management

Sakaki, Hamid; Jackson, Dave O.; Jory, Surendranath Rakesh

doi:10.1007/s11156-016-0588-7

Cited by 90 publications

(67 citation statements)

References 42 publications

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“…Due to the intensive monitoring role of institutional investors, creditors need not extensively monitor management as they would do if institutional investors are not significantly present. Furthermore, the accruals quality serves as a credible screening mechanism, because institutional equity owners reduce misreporting incentives (Harford et al ., ) and earnings management practices (Sakaki et al ., ). Under this hypothesis, firms with scrutinising institutional investors will be less likely to demand greater monitoring by specialised creditors.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 97%

“…(), (ii) on average, the duration of equity stakes is ten quarters, and (iii) the volatility of ownership stakes is 1 percent, which is similar to the sample average reported by Sakaki et al . (). By construct, the measure of abnormal institutional attention ( AIA ) is very dispersed (SD = 0.97).…”

Section: Research Design and Sample Detailsmentioning

confidence: 97%

“…() and Sakaki et al . (), we expect institutional investors to have a monitoring role. Consistent with Elyasiani et al .…”

Section: Research Design and Sample Detailsmentioning

confidence: 99%

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Who monitors opaque borrowers? Debt specialisation, institutional ownership, and information opacity

Platikanova

Soonawalla

2019

Accounting & Finance

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In this study, we suggest that the level of information opaqueness determines the propensity of publicly listed firms to have debt financing from only a few debt types (i.e., debt specialisation). Using accruals quality as a proxy for information opaqueness, we find that the degree of debt specialisation is lower for firms with high-quality accruals. This result is consistent with the notion that information collection and monitoring costs are higher for firms that have higher informational opacity, explaining the tendency towards debt specialisation. We further argue that creditors need not monitor borrowers so closely when they are monitored by institutional owners. The empirical findings support this argument and show that firms with more stable institutional ownership are likely to have less specialised debt types. The empirical evidence is also consistent with the expectation that stable institutional ownership is likely to reduce the demand for monitoring over accruals management. Using S&P 500 membership as an exogenous event driving institutional ownership changes, we further document that debt specialisation is decreasing in accruals quality when institutional investors are expected to have an influence.An extensive literature in corporate finance and financial accounting examines the accounting information properties that facilitate access to debt

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 97%

Section: Research Design and Sample Detailsmentioning

confidence: 97%

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Who monitors opaque borrowers? Debt specialisation, institutional ownership, and information opacity

Platikanova

Soonawalla

2019

Accounting & Finance

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“…Roychowdhury [9] and Malik [30] found evidence that real earnings manipulations to avoid loss or negative earnings surprises are less pronounced when firms have sophisticated, larger institutional investors. Sakaki et al [31] found that firms co-owned by stable institutional owners reveal a lower magnitude of real earnings management by restricting overproduction. Additionally, stability in the ownership of pressure-sensitive and -insensitive institutional investors mitigates the use of real earnings management.…”

Section: Institutional Investors and Earnings Managementmentioning

confidence: 99%

“…The links between accounting (accrual) earnings management and ownership structure have been analyzed in many outstanding studies described in the next section, including [3,[15][16][17][18][19][20][21][22][23][24][25]. Research on the relationship between the magnitude of real earnings management and the ownership structure of companies has been much more limited and has not necessarily focused on ownership concentration and managerial ownership, including that of [26][27][28][29][30][31][32][33]. Hsu and Wen [34] analyzed only the linear correlation between the percentage of insider shareholdings and the magnitude of real earnings management.…”

Section: Introductionmentioning

confidence: 99%

The Influence of a Company’s Ownership Structure on Upward Real Earnings Management

Piosik

Genge

2019

Sustainability

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Financial transparency, including transparency of transactions, is one of the pillars of sustainability. This study investigates whether a company’s ownership structure, including ownership concentration, managerial ownership, and the presence of institutional investors, affects upward real earnings management practices. The research is based on companies listed on the Warsaw Stock Exchange in Poland adapting panel data regression models. The significance and contribution to literature of the paper lies in the fact that we provide evidence that the association between the magnitude of total upward real earnings management and shareholder concentration is U-shaped, thereby indicating that there is an optimal level of ownership concentration, minimizing the magnitude of upward real earnings management and thus increasing financial transparency. Our results show the negative relationship between total upward real earnings management and managerial ownership, thereby we confirm the alignment of interest hypothesis, in terms of real earnings management. We also confirm that individual instruments of real earnings management are linked to ownership concentration and managerial ownership in specific ways. The presence of institutional investors reduces the magnitude of total upward real earnings management.

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Board gender diversity and the cost of equity: What difference does gender quota legislation make?

2023

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This study examines the relationship between women directors and the cost of equity (COE). Investigating the French firm's sample, we find a significant negative effect of women directors on the COE. Our results also document that the effect of women directors on reducing the COE is significant for firms that have a critical mass of at least four women directors. Using the difference‐in‐difference (DID) and propensity score matching (PSM) approach, we find that the relationship between female directors and lower equity costs is significant for the period following the Copé–Zimmermann gender quota law. The results show that women directors' presence on corporate boards is also supported by economic reasons. The study provides implications in relation to the Copé–Zimmermann law in France.

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Institutional ownership stability and real earnings management

Cited by 90 publications

References 42 publications

Who monitors opaque borrowers? Debt specialisation, institutional ownership, and information opacity

Who monitors opaque borrowers? Debt specialisation, institutional ownership, and information opacity

The Influence of a Company’s Ownership Structure on Upward Real Earnings Management

Board gender diversity and the cost of equity: What difference does gender quota legislation make?

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