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Agency Conflicts And Financial Reporting Quality

Author

Listed:
  • Slavko Sodan

    (University of Split, Split, Croatia, Faculty of Economics, Business and Tourism)

  • Ivana Perica

    (University of Split, Split, Croatia, Faculty of Economics, Business and Tourism)

  • Stipe Curkovic

    (University of Split, Split, Croatia, Faculty of Economics, Business and Tourism)

Abstract

This paper examines the impact of agency conflicts in owner-manager-creditors relations on financial reporting quality. Based on arguments from the agency theory and the positive accounting theory, we assume that companies without debt and in which managers are ultimate owners, i.e. where agency conflicts are not profound, have a higher earnings quality than companies using financial leverage and with separated owner-manager role. The data for empirical part of the research was gathered from Orbis Europe database. The sample consists of very large, large, and medium-sized companies from Croatia, Serbia, and Slovenia with financial data covering 2018 and 2019. In order to test research hypotheses the sample is divided into two groups depending on a company's ownership and debt characteristics. Descriptive statistics, univariate tests, correlation analysis and regression analysis are used to analyse the results. Our findings indicate that there is no statistically significant difference in the earnings quality concerning the type of ownership, while the level of financial leverage, by contrast, significantly decreases the earnings quality.

Suggested Citation

  • Slavko Sodan & Ivana Perica & Stipe Curkovic, 2023. "Agency Conflicts And Financial Reporting Quality," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 32(2), pages 495-509, december.
    • Handle: RePEc:avo:emipdu:v:32:y:2023:i:2:p:495-509
    DOI: 10.17818/EMIP/2023/2.10
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    References listed on IDEAS

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    6. Wan Masliza Wan Mohammad & Shaista Wasiuzzaman, 2020. "Effect of audit committee independence, board ethnicity and family ownership on earnings management in Malaysia," Journal of Accounting in Emerging Economies, Emerald Group Publishing Limited, vol. 10(1), pages 74-99, January.
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    More about this item

    Keywords

    Financial leverage; Agency costs; Financial reporting quality;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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