An Investigation of Factors Influencing the Association between Top Management Ownership and Earnings Management

37 Pages Posted: 21 Dec 2007

See all articles by Marion R. Hutchinson

Marion R. Hutchinson

Queensland University of Technology - QUT Business School

Sidney Leung

City University of Hong Kong (CityUHK) - Department of Accountancy

Date Written: 2007

Abstract

This study conjectures and shows that the level of top management stock ownership is non-monotonically associated with managers' propensity to manage earnings. Increasing ownership from low levels decreases earnings management while ownership at high levels increases earnings management. Further, this study attempts to discern when the effects of management ownership are more salient for the firm. The results of this exploratory analysis of 15,945 firm observations over a six-year period show that the non-monotonic association between top management ownership and earnings management is significant, and hence more important, for the firm characteristics of low growth opportunities, high operating volatility, small size, frequent losses, high-technology, and low institutional ownership.

Keywords: Management ownership, earnings management, discretionary accruals, firm characteristics

JEL Classification: G34, G10

Suggested Citation

Hutchinson, Marion R. and Leung, Sidney, An Investigation of Factors Influencing the Association between Top Management Ownership and Earnings Management (2007). Available at SSRN: https://ssrn.com/abstract=1077467 or http://dx.doi.org/10.2139/ssrn.1077467

Marion R. Hutchinson

Queensland University of Technology - QUT Business School ( email )

GPO Box 2434
Brisbane, Queensland 4001
Australia
0417548273 (Phone)

Sidney Leung (Contact Author)

City University of Hong Kong (CityUHK) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China
+852 2788-7924 (Phone)
+852 2788-7944 (Fax)

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