Ownership Structure and Earnings Management Practices: An Empirical Evidence

Abstract

This paper aims to analyse the mitigating effects of ownership structure on earnings management (EM) practices. Data were collected from firms listed on Bursa Malaysia’s main market, covering the years 2011 through 2021. Panel Regression was employed to analyses the data, with the aid of STATA software version 17. The finding of this study confirmed significant negative association between foreign ownership (FOW) and EM of listed firms in Malaysia. Additionally, managerial ownership (MOW) and ownership concentration (OC) were found to be insignificantly related to EM. Similarly, the two control variables included in the analysis, only firm size (FISZ) was found to be significantly related to EM practices. Practically, this study offers an effective framework for OC, MOW, FOW and EM to reduce executive manager's opportunistic behaviour. The findings from this study supports the need for broader understanding so that investors and other stakeholders can see through earnings reports and, as a result, make informed contractual decisions, particularly when those decisions pertain to non-owner-controlled firms. In addition, the study’s findings provide helpful information to stakeholders in Malaysian listed companies on the value of FOW and it influence on EM mitigation.