Ownership Structure, Discretionary Accruals and the Informativeness of Earnings

In this paper we use panel data methodology to examine the relationship between ownership structure, discretionary accruals and the informativeness of earnings for a sample of Spanish non‐financial companies listed on the Madrid Stock Exchange during the period 1999–2002. We find a non‐linear relati...

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Bibliographic Details
Published in:Corporate governance : an international review 2007-07, Vol.15 (4), p.677-691
Main Authors: Sánchez-Ballesta, Juan Pedro, García-Meca, Emma
Format: Article
Language:English
Subjects:
Accruals
Business management
Business studies
capital markets
Corporate finance
Corporate governance
Correlation analysis
discretionary accruals
Earnings
Earnings management
Financial information
Ownership
Ownership and control
ownership structure
Spain
Stock exchange
Stockholders
Studies
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Summary:In this paper we use panel data methodology to examine the relationship between ownership structure, discretionary accruals and the informativeness of earnings for a sample of Spanish non‐financial companies listed on the Madrid Stock Exchange during the period 1999–2002. We find a non‐linear relationship between insider ownership and discretionary accruals and between insider ownership and earnings explanatory power for returns. This supports the hypothesis that insider ownership contributes both to the informativeness of earnings and to constraining earnings management when the proportion of shares held by insiders is not too high. When insiders own a large percentage of shares, however, they are entrenched and the relation between insider ownership, discretionary accruals and earnings informativeness reverses.
ISSN:0964-8410
1467-8683
DOI:10.1111/j.1467-8683.2007.00596.x