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Does ownership structure reduce earnings manipulation practice of Egyptian listed firms? Evidence from a dynamic panel threshold model

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  • Eman F. Attia

    (Arab Academy for Science, Technology and Maritime Transport
    Huddersfield University)

  • Wafa Khémiri

    (University of Manouba (Tunisia))

  • Messaoud Mehafdi

    (Huddersfield University)

Abstract

This paper analyzes the nonlinear relationship between corporate ownership structure and income manipulation through accrual-based earnings management in the Egyptian context. To do so, we develop a sample of 78 listed non-financial firms, covering the period 2008–2017. Using the dynamic panel threshold analysis approach (Seo and Shin in J Econom 195: 169–186, 2016), we found a nonlinear relationship between ownership structure and earnings manipulations. This proves the presence of an optimal ownership structure threshold below which the ownership structure generates an entrenchment effect on earnings management. However, above this threshold, the ownership structure has an alignment effect. Certainly, these results confirm the theoretical predictions in relation to managerial ownership, governmental ownership, and earnings management (agency, political and development theories, respectively). These results yield important policy implications. It is recommended to set an optimal threshold of ownership structure to control the firm`s managers. This is likely to avoid earnings management.

Suggested Citation

  • Eman F. Attia & Wafa Khémiri & Messaoud Mehafdi, 2023. "Does ownership structure reduce earnings manipulation practice of Egyptian listed firms? Evidence from a dynamic panel threshold model," Future Business Journal, Springer, vol. 9(1), pages 1-18, December.
    • Handle: RePEc:spr:futbus:v:9:y:2023:i:1:d:10.1186_s43093-023-00213-4
    DOI: 10.1186/s43093-023-00213-4
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    Cited by:

    1. Eman Fathi Attia & Messaoud Mehafdi, 2023. "The Dynamic Endogeneity Issue between Corporate Ownership Structure and Real-Based Earnings Manipulation in an Emerging Market: Advanced Dynamic Panel Model," Risks, MDPI, vol. 11(11), pages 1-27, October.
    2. Manasi Gokhale & Deepa Pillai, 2024. "Firm level and country level determinants of earnings management in emerging economies: a systematic framework-based review," Future Business Journal, Springer, vol. 10(1), pages 1-16, December.

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