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Corporate Ownership Structure and the Informativeness of Earnings
Author(s) -
Yeo Gillian H.H.,
Tan Patricia M.S.,
Ho Kim Wai,
Chen Sheng–Syan
Publication year - 2002
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00460
Subject(s) - accrual , earnings , shareholder , earnings management , affect (linguistics) , business , contrast (vision) , monetary economics , accounting , positive relationship , earnings response coefficient , econometrics , economics , corporate governance , finance , psychology , social psychology , communication , artificial intelligence , computer science
This study extends prior studies by examining how managerial ownership and external unrelated blockholdings affect the informativeness of earnings. The results are in contrast to prior studies. A non–linear relation exists between managerial ownership and earnings informativeness. Earnings informativeness increases with managerial ownership at low levels but not at higher levels of managerial ownership where the entrenchment effect sets in. Consistent with the role of large shareholder monitoring, the evidence shows a strong positive relationship between external unrelated blockholdings and earnings informativeness. These results are supported when income–increasing and absolute discretionary accruals are used to measure the extent of earnings management