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The breadth of ownership and corporate earnings management

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  • Ma, Guangyuan
  • Wang, Yihong
  • Xu, Yekun
  • Zhang, Limin

Abstract

This paper investigates the relationship between the breadth of ownership and earnings management. We find that the breadth of ownership is associated with a reduction in earnings management in Chinese firms. We partition the breadth of ownership into individual and institutional investors and find that the individual investors have the reducing effect. In contrast, institutional investors have the opposite effect, which can be mitigated by investor diversity and ownership percentage. We argue that stock liquidity and investors' clique are two crucial underlying channels through which the breadth of ownership impacts earnings management. Our study is of importance to various stakeholders.

Suggested Citation

  • Ma, Guangyuan & Wang, Yihong & Xu, Yekun & Zhang, Limin, 2023. "The breadth of ownership and corporate earnings management," Finance Research Letters, Elsevier, vol. 52(C).
    • Handle: RePEc:eee:finlet:v:52:y:2023:i:c:s1544612322007255
    DOI: 10.1016/j.frl.2022.103549
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    Cited by:

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    2. Zhihong Mao & Siyang Wang & Yu‐En Lin, 2024. "ESG, ESG rating divergence and earnings management: Evidence from China," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(4), pages 3328-3347, July.

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    More about this item

    Keywords

    Breadth of ownership; Earnings management; Institutional investors; Individual investors;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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