Are insiders equal? Evidence from earnings management in closely held East Asian firms

Najah Attig, Ruiyuan Chen, Sadok El Ghoul, Omrane Guedhami, Chuck Kwok and Jeffrey Pittman

Research in International Business and Finance, 2020, vol. 54, issue C

Abstract: In analyzing newly collected data on the ultimate ownership structure of publicly traded firms in nine East Asian economies, we contribute to international accounting research by providing evidence on earnings management in insider-controlled firms in this region. We find that family-controlled firms engage in less (more) accrual-based (real) earnings management than other insider-controlled firms. Our analysis suggests that controlling families, unlike other types of ultimate owners, tend to substitute real earnings management for accrual-based earnings management. To help empirically clarify the role that two incentives (entrenchment versus signaling) play in driving the substitution between real and accruals-based earnings management, we examine their valuation impact and find that both types negatively affect the future valuation of family firms. In another set of results consistent with expectations, we document that country-level investor protection and firm external financing demand shape the practice of earnings management in family-controlled firms.

Keywords: Family conglomerates; Earnings management; Comparative accounting systems and practice; Real activities manipulation; Corporate governance; East Asia (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:54:y:2020:i:c:s0275531920301951

DOI: 10.1016/j.ribaf.2020.101243

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