Ownership Structure and Earnings Management: Evidence from Iran

Abstract

Family enterprises have been a major part of capital markets. By possessing most of their stock or being a member of the board, family members are considered the main decision makers in family businesses. Earnings on the other hand have always been a performance indicator which is under management control, most often managed or manipulated.This research seeks to identify and compare earnings management between family and non-family structured firms. After definingcriteria regarding family and non-family firms, 31 samples were selected as family based and they were grouped in relevant industries according to Tehran Stock Exchange categorization. Afterwards we randomly selected non-family firms from those industries with the same proportion. To test the research hypothesis, Jones adjusted model (Dechow et al, 1995) and multivariable regression model were used. The results indicate a meaningful relation between earnings management and ownership structure of firms where in average, non-family firms engagein earnings management more often than family ones.

Earnings Management in Public Family Firms under Economic Adversity

“…Wang (2006), Ali et al (2007) and Jiraporn and DaDalt (2009) conclude that US family firms are less likely to manage earnings than non-family firms, consistent with the alignment effect of family ownership. Similar conclusions were obtained by Murphy et al (2010), in Australia, Prencipe et al (2008) in Italy, Ghabdian et al (2012) in Iran and Paiva and Lourenço (2013) in the UK. Wang (2006) also finds evidence of less persistence of transitory loss components in earnings.…”

“…,Jiraporn and DaDalt (2009),Murphy et al (2010),Ghabdian et al (2012),Paiva and Lourenço (2013) andAchleitner et al (2014). Specifically, our finding seems to be consistent with the alignment hypothesis(Jensen and Meckling 1976;Fama and Jensen 1983;González and García-Meca 2014), as well as with the long-term orientation of FFGomez-Mejia et al 2007;Jiraporn and DaDalt 2009;Salvato and Moores 2010) and the desire to pass firms onto succeeding generations(Berrone et al 2012; …”

“…However, although earnings management has been studied by academics and practitioners in recent decades (Healy and Wahlen 1999;Buckmaster 2001;Burgstahler et al 2006;Dechow and Dichev 2002;Schmid et al 2010), research in the context of family businesses is required. Indeed, little evidence exists as to the relationship between earnings management and the ownership structure of firms (Prencipe et al 2008;Ghabdian et al 2012;Kvaal et al 2012), particularly in the context of non-Anglo-Saxon developed countries (Bhaumik and Gregoriou 2010). Furthermore, limited research has been undertaken analysing the earnings management of family businesses in conjunction with economic adversity.…”

Factors Associated with Financial Restatements: Evidence from Malaysia

“…Based on prior argument, family ownership may have a positive or negative effect on the company (Choi, Park & Yoo 2007). The controlling owner of the company may have a right to grant incentives that affect decision-making (Ghabdian, Attaran & Froutan 2012). Furthermore, the lack of monitoring from outside shareholders may lead to inconsistent action taken by the family owners.…”

Pengaruh Cost of Rem Terhadap Real Earnings Management Dengan Aset Dan Market to Book Value Sebagai Variabel Kontrol

“…Hal ini dapat dijelaskan bahwa free cash flow perusahaan dapat dianggap sebagai faktor motif dari manajemen laba. Achleitner et al (2008), Ghabdian et al (2012) dan Munir et al (2013)…”