Does Ownership Concentration Influence Discretionary Earnings Quality in Emerging Market: Evidence from Nigeria

Document Type: Original Research

Authors

1 Department of Accounting, Anchor University, Lagos, Nigeria

2 Department of Business Administration, Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya

Abstract

The purpose of this study was to ascertain the influence of ownership concentration on discretionary earnings quality among quoted non-financial companies on Nigeria stock exchange. The study used panel data, Diagnostic tests were performed such as linearity test, Autocorrelation test, and heteroscedasticity. Thereafter correlation and simple regression was performed on 105 quoted non-financial companies for 15 years from 2002 to 2016. The findings revealed a positive and significant relationship between ownership concentration and discretionary earnings quality. The study recommends that non-financial companies should also ensure that the ownership structure is diverse and widely owned to safeguard the minority shareholders and reduce the overbearing power of the majority shareholders as it was discovered that concentrated ownership has positive significant relationship with discretionary earnings quality of the quoted non-financial companies in Nigeria.

Keywords


Alves, S. (2012). Ownership structure and earnings management: Evidence from Portugal. Australasian Accounting Business & Finance Journal6(1), 57.
Arouri, H., Hossain, M., & Badrul Muttakin, M. (2014). Effects of board and ownership structure on corporate performance. Journal of Accounting in Emerging Economies, 4(1), 117–130. doi:10.1108/jaee-02-2012-0007
Bartram, S. M., Brown, P. R., How, J. C. Y., & Verhoeven, P. (2012). Agency conflicts and corporate payout policies: A global study. SSRN Electronic Journal. doi:10.2139/ssrn.1361500
Bhattacharya, N., Desai, H., & Venkataraman, K. (2013). Does earnings quality affect information asymmetry? Evidence from trading costs. Contemporary Accounting Research30(2), 482-516.
Blattberg, C. (2004). Welfare: Towards the Patriotic Corporation; from Pluralist to Patriotic Politics: Putting Practice First.  New York: Oxford University Press, 172-184.
Bouvatier, V., Lepetit, L., & Strobel, F. (2014). Bank income smoothing, ownership concentration and the regulatory environment. Journal of Banking & Finance, 41, 253–270. doi:10.1016/j.jbankfin.2013.12.001
Claessens, S., & Djankov, S. (1999). Ownership concentration and corporate performance in the Czech Republic. Journal of comparative economics27(3), 498-513.
Cornett, M.M., McNutt, J.J., Tehranian, H., 2009. Corporate governance and earnings management at large U.S. bank holding companies. Journal of Corporate Finance 15, 412–430.
Holderness, C. G. (2003). A Survey of Block holders and Corporate Control, Economic Policy Review, New York: Federal Reserve Bank of New York, 9, 51-64.
Kouaib, A., & Jarboui, A. (2014). External audit quality and ownership structure: Interaction and impact on earnings management of industrial and commercial Tunisian sectors. Journal of Economics Finance and Administrative Science, 19(37), 78–89. doi:10.1016/j.jefas.2014.10.001
Leventis, S., Dimitropoulos, P., 2012. The role of corporate governance in earnings management: experience from US banks. Journal of Applied Accounting Research 13, 161–177.
Liu, X., Saidi, R., & Bazaz, M. (2014). Institutional incentives and earnings quality: The influence of government ownership in china. Journal of Contemporary Accounting & Economics, 10(3), 248–261. doi:10.1016/j.jcae.2014.10.003
Nguyen, T., Locke, S., & Reddy, K. (2015). Ownership concentration and corporate performance from a dynamic perspective: Does national governance quality matter?. International Review of Financial Analysis41, 148-161.
Saltaji, I. M. (2013). Corporate governance and agency theory how to control agency costs. Internal Auditing & Risk Management8(4).
Van Slyke, D. M. (2007). Agents or stewards: Using theory to understand the government-nonprofit social service contracting relationship. Journal of Public Administration Research and Theory, 17(2), 157-187
Wang, K., & Shailer, G. (2015). Ownership concentration and firm performance in emerging markets: a meta‚Äźanalysis. Journal of Economic Surveys29(2), 199-229.
Zattoni, A., & Cuomo, F. (2015). Institutional Change and Ownership Patterns in Italy. In Shareholder Empowerment (pp. 267-296). Palgrave Macmillan US.