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Ownership structure and real earnings management: An empirical study on emerging economyDownload This Article
Nitai Chandra Debnath , Suman Paul Chowdhury, Safaeduzzaman Khan
This work is licensed under a Creative Commons Attribution 4.0 International License.
We observe the association amid ownership structure and real earnings management in Bangladesh. Our study takes 2195 firm-year observations which are listed on the Dhaka Stock Exchange over the period of 2000-2017. The outcome of the panel least square regression indicates that inside ownership, as well as foreign ownership, is inversely related to real earnings management, whereas institutional ownership is positively related to real earnings management. In particular, firms tend to reduce discretionary expenses to manage earnings if the magnitude of inside ownership is low. In contrast to that, when firms are characterized by more institutional ownership, they are more inclined towards real earnings management through additional price discounts, offering a more friendly credit facility, and lowering discretionary expense. This result is consistent with previous findings. Nevertheless, if firms encounter an absence of foreign ownership, they prefer to manage earnings through operating at over-production levels as well as lowering discretionary expenses. Additionally, we find that corporate governance is playing a beneficial role in limiting real earnings management.
Keywords: Real Earnings Management, Ownership Structure, Corporate Governance
Authors’ individual contribution: Conceptualization – N.C.D. and S.P.C.; Methodology – N.C.D. and S.P.C.; Writing – N.C.D. and S.K.; Formal Analysis – N.C.D. and S.P.C.; Resources – S.K.; Supervision – S.P.C.
Declaration of conflicting interests: The Authors declare that there is no conflict of interest.
JEL Classification: M410, G32, G34
Published online: 12.01.2021
How to cite this paper: Debnath, N. C., Chowdhury, S. P., & Khan, S. (2021). Ownership structure and real earnings management: An empirical study on emerging economy. Corporate Ownership & Control, 18(2), 74-89. https://doi.org/10.22495/cocv18i2art6