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Ownership Structure and its Endogeneity Effect on the Quality of Financial Reporting

Ahnaf Ali Alsmady

International Journal of Academic Research in Business and Social Sciences, 2018, vol. 8, issue 3, 509-526

Abstract: The study aims to examine the effect of ownership structure on the quality of financial reporting (QFRs). It examines ownership concentration and individual investors both foreign and local. Ownership concentration endogeneity, company age, a log of total sales and industry affiliation are controlled for in the models. The date of the study consists of 68 annual reports collected from Jordanian companies that are listed on Amman Stock Exchange (ASE) for the period 2005 to 2015. The Hausman test of ownership concentration endogeneity was performed for both models. The first model results show that ownership concentration variable has no significant effect on QFRs. While, individual foreign ownership, company age, a log of total sales and industry affiliation have a positive effect on QFRs. Also, the second model showed a consistent result of the ownership concentration effect on QFRs. While, individual local ownership, company age, a log of total sales and industry affiliation have a positive effect on the QFRs. The results support the agency theory in the Jordanian context that higher ownership concentration reduces the QFRs. Moreover, the study contributes to existing literature by highlighting the endogeneity problem of ownership concentration. The results are useful to policymaker, shareholders and accountants in local and global market to improve the reliability and QFRs.

Keywords: Ownership Structure; Endogeneity Problem and QFRs (search for similar items in EconPapers)
Date: 2018
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