IDEAS home Printed from https://ideas.repec.org/a/sae/intare/v4y2001i1p109-124.html
   My bibliography  Save this article

The Impact of Ownership Structure on Earnings Usefulness: Japanese Evidence

Author

Listed:
  • Chung-Ki Min
  • Sun Young Whang

Abstract

Using a large sample of Japanese firms, this paper examines the impact of the ownership structure on managerial incentives for income smoothing through discretionary accrual choices. Our results show that like US managers, Japanese managers engage in income smoothing in consideration of both current earnings and expected future earnings. More importantly, we find that managers' ability to smooth income through discretionary accrual choices is constrained by external monitoring by financial institutions, while it is enhanced by managerial entrenchment arising from cross-corporate shareholdings.

Suggested Citation

  • Chung-Ki Min & Sun Young Whang, 2001. "The Impact of Ownership Structure on Earnings Usefulness: Japanese Evidence," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 4(1), pages 109-124, March.
    • Handle: RePEc:sae:intare:v:4:y:2001:i:1:p:109-124
    DOI: 10.1177/223386590100400108
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/223386590100400108
    Download Restriction: no
    File URL: https://libkey.io/10.1177/223386590100400108?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Michael E. Porter, 1992. "Capital Choices: Changing The Way America Invests In Industry," Journal of Applied Corporate Finance, Morgan Stanley, vol. 5(2), pages 4-16, June.
    2. Fudenberg, Drew & Tirole, Jean, 1995. "A Theory of Income and Dividend Smoothing Based on Incumbency Rents," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 75-93, February.
    3. Jeremy C. Stein, 1989. "Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(4), pages 655-669.
    4. Prowse, Stephen D., 1990. "Institutional investment patterns and corporate financial behavior in the United States and Japan," Journal of Financial Economics, Elsevier, vol. 27(1), pages 43-66, September.
    5. Jones, Jj, 1991. "Earnings Management During Import Relief Investigations," Journal of Accounting Research, Wiley Blackwell, vol. 29(2), pages 193-228.
    6. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    7. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    8. Jacobson, Robert & Aaker, David, 1993. "Myopic management behavior with efficient, but imperfect, financial markets : A comparison of information asymmetries in the U.S. and Japan," Journal of Accounting and Economics, Elsevier, vol. 16(4), pages 383-405, October.
    9. DeFond, Mark L. & Park, Chul W., 1997. "Smoothing income in anticipation of future earnings," Journal of Accounting and Economics, Elsevier, vol. 23(2), pages 115-139, July.
    10. Lichtenberg, Frank R. & Pushner, George M., 1994. "Ownership structure and corporate performance in Japan," Japan and the World Economy, Elsevier, vol. 6(3), pages 239-261, October.
    11. Stulz, ReneM., 1988. "Managerial control of voting rights : Financing policies and the market for corporate control," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 25-54, January.
    12. Kaplan, Steven N, 1994. "Top Executive Rewards and Firm Performance: A Comparison of Japan and the United States," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 510-546, June.
    13. Holthausen, Robert W. & Larcker, David F. & Sloan, Richard G., 1995. "Annual bonus schemes and the manipulation of earnings," Journal of Accounting and Economics, Elsevier, vol. 19(1), pages 29-74, February.
    14. Prowse, Stephen D, 1992. "The Structure of Corporate Ownership in Japan," Journal of Finance, American Finance Association, vol. 47(3), pages 1121-1140, July.
    15. Healy, Paul M., 1985. "The effect of bonus schemes on accounting decisions," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 85-107, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chung, Richard & Firth, Michael & Kim, Jeong-Bon, 2002. "Institutional monitoring and opportunistic earnings management," Journal of Corporate Finance, Elsevier, vol. 8(1), pages 29-48, January.
    2. Spagnolo, Giancarlo, 2005. "Managerial incentives and collusive behavior," European Economic Review, Elsevier, vol. 49(6), pages 1501-1523, August.
    3. Joel S. Demski, 1998. "Performance Measure Manipulation," Contemporary Accounting Research, John Wiley & Sons, vol. 15(3), pages 261-285, September.
    4. Ke Zhong & Robert B. Welker & Donald W. Gribbin, 2010. "Method‐Shifting in Aggressive Earnings Reporting: The Case of the US Software Industry's Response to New US Regulation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(7‐8), pages 792-814, July.
    5. Ping-Sheng Koh, 2005. "Institutional Ownership and Income Smoothing: Australian Evidence," Accounting Research Journal, Emerald Group Publishing, vol. 18(2), pages 93-110, September.
    6. Cai, Jun & Loughran, Tim, 1998. "The performance of Japanese seasoned equity offerings, 1971-1992," Pacific-Basin Finance Journal, Elsevier, vol. 6(5), pages 395-425, November.
    7. Ruichang Lu & Weijia He & Xiaojun Zhang, 2023. "Using Available‐for‐sale Securities to Smooth Earnings: Evidence from China," Abacus, Accounting Foundation, University of Sydney, vol. 59(1), pages 163-196, March.
    8. Nagy, Albert L. & Neal, Terry L., 2001. "An empirical examination of corporate myopic behavior: a comparison of Japanese and U.S. companies," The International Journal of Accounting, Elsevier, vol. 36(1), pages 91-113, February.
    9. Guidry, Flora & J. Leone, Andrew & Rock, Steve, 1999. "Earnings-based bonus plans and earnings management by business-unit managers1," Journal of Accounting and Economics, Elsevier, vol. 26(1-3), pages 113-142, January.
    10. Ke Zhong & Robert B. Welker & Donald W. Gribbin, 2010. "Method-Shifting in Aggressive Earnings Reporting: The Case of the US Software Industry's Response to New US Regulation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(7-8), pages 792-814.
    11. Craig J. Chapman & Thomas J. Steenburgh, 2011. "An Investigation of Earnings Management Through Marketing Actions," Management Science, INFORMS, vol. 57(1), pages 72-92, January.
    12. Gropp, Reint E. & Köhler, Matthias, 2010. "Bank owners or bank managers: who is keen on risk? Evidence from the financial crisis," ZEW Discussion Papers 10-013, ZEW - Leibniz Centre for European Economic Research.
    13. repec:bof:bofrdp:urn:nbn:fi:bof-201508131351 is not listed on IDEAS
    14. Racic, Stanko, 2010. "Is Japanese management superior? Evidence from the performance of the USA targets in partial acquisitions," Journal of Multinational Financial Management, Elsevier, vol. 20(1), pages 14-34, February.
    15. Jullavut Kittiakaraskun & Yiuman Tse & George H.K. Wang, 2011. "The Impact of Trading Activity by Trader Types on Asymmetric Volatility in Nasdaq-100 Index Futures," Working Papers 0021, College of Business, University of Texas at San Antonio.
    16. Kothari, S.P. & Leone, Andrew J. & Wasley, Charles E., 2005. "Performance matched discretionary accrual measures," Journal of Accounting and Economics, Elsevier, vol. 39(1), pages 163-197, February.
    17. Andrzej Piosik & Ewa Genge, 2019. "The Influence of a Company’s Ownership Structure on Upward Real Earnings Management," Sustainability, MDPI, vol. 12(1), pages 1-24, December.
    18. Van Thuan Nguyen & Li Xu, 2010. "The Impact of Dual Class Structure on Earnings Management Activities," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(3-4), pages 456-485.
    19. Debra Jeter & Lakshmanan Shivakumar, 1999. "Cross-sectional estimation of abnormal accruals using quarterly and annual data: effectiveness in detecting event-specific earnings management," Accounting and Business Research, Taylor & Francis Journals, vol. 29(4), pages 299-319.
    20. Kasanen, Eero & Kinnunen, Juha & Niskanen, Jyrki, 1996. "Dividend-based earnings management: Empirical evidence from Finland," Journal of Accounting and Economics, Elsevier, vol. 22(1-3), pages 283-312, October.
    21. Susana Callao & José I. Jarne & David Wróblewski, 2017. "Why Do Companies From Emerging Countries Manage Earnings?," Eurasian Journal of Business and Management, Eurasian Publications, vol. 5(2), pages 60-84.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:intare:v:4:y:2001:i:1:p:109-124. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.hufs.ac.kr/user/hufsenglish/re_1.jsp .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.