The relationship between ownership structure and earnings quality in the French context

Abstract

The main objective of this paper is to investigate the relationship between ownership structure and earnings quality, proxied by earnings management and informativeness. This study focuses on a sample of 117 French companies belonging to the SBF 250 index during the period 2003-2011. For our analysis, we use the panel data econometrics and, more specifically, the method of Panel Corrected Standard Errors. The results of linear regressions show that managerial ownership has a positive impact on the earnings management and reveal that ownership concentration and institutional ownership have a positive impact on the earnings informativeness. In addition, the results of this study show the existence of non-linear relationship only for ownership concentration and institutional ownership.

The Dynamic Endogeneity Issue between Corporate Ownership Structure and Real-Based Earnings Manipulation in an Emerging Market: Advanced Dynamic Panel Model

“…The results are inconsistent with the majority of empirical studies that revealed a positive association between managerial ownership and EM such as the studies of Ayadi and Boujelbène (2014) in France; Aygun et al (2014) in Turkey;and Al-Fayoumi et al (2010) in Jordan discovered that the association between managerial ownership and EM is consistent with the entrenchment hypothesis where executive ownership is ineffective in aligning the interests of shareholders with insiders' interests to make value-maximizing decisions. However, this relationship has changed due to changes in the economic condition of the country, especially in times of economic downturns.…”

“…Empirical studies have shown a positive association between managerial ownership and earnings management, as higher levels of managerial ownership increase the discretionary power and authority of managers, leading them to entrench themselves and prioritize their interests over those of the shareholders (Fama and Jensen 1983;Ayadi and Boujelbène 2014;Aygun et al 2014). This is in line with the entrenchment hypothesis, which states that higher levels of managerial ownership negatively affect the financial reporting quality (Al-Fayoumi et al 2010;Charfeddine et al 2013;Sepasi et al 2016;Ogbonnaya et al 2016;Waweru and Prot 2018).…”

“…These results are not also in line with the entrenchment hypothesis, which proposes that insiders' ownership might turn out to be useless in supporting insiders to make value-maximizing decisions. For instance, Al-Fayoumi et al (2010) in Jordan; Ayadi and Boujelbène (2014) in France; Aygun et al (2014) in Turkey; and Waweru and Prot (2018) in Eastern Africa revealed a positive and significant relationship between managerial ownership and DAs. They suggested that most of the emerging countries with weak investor protection policies give managers the opportunities to conceal earnings and to misuse corporate resources, which hence leads to wealth expropriation.…”

“…It is the total ownership held by executive directors scaled by the total shares outstanding in a given year (e.g., Hutchinson and Gul 2004;Al-Ghamdi 2012;Alves 2012;Ayadi and Boujelbène 2014;Amer 2016;Farouk and Bashir 2017;Waweru and Prot 2018).…”

Real earnings management and corporate governance: a study of Latin America

“…There are a large number of studies that examine the relation between ownership structure characteristics and earnings management (Alves, 2012;Bekiris & Doukakis, 2011;Fan & Wong, 2002;Kazemian & Sanusi, 2015;Koh, 2003;Leuz, et al, 2003;Masmoudi Ayadi, 2014;Mellado-Cid et al, 2018;Siregar & Utama, 2008;Velury & Jenkins, 2006). Concerning the ownership concentration and its impact on the management of earnings there are two theoretical hypotheses.…”