Ownership Structure, Discretionary Accruals and the Informativeness of Earnings

15 Pages Posted: 8 Jul 2007


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.

Suggested Citation

Sánchez-Ballesta, Juan P. and García-Meca, Emma, Ownership Structure, Discretionary Accruals and the Informativeness of Earnings. Corporate Governance: An International Review, Vol. 15, No. 4, pp. 677-691, July 2007, Available at SSRN: https://ssrn.com/abstract=998144 or http://dx.doi.org/10.1111/j.1467-8683.2007.00596.x

Juan P. Sánchez-Ballesta (Contact Author)

University of Murcia ( email )

Avda Teniente Flomesta, 5
Murcia, Murcia 30100

Emma García-Meca

Universidad Politécnica de Cartagena ( email )

Departamento Economia Financiera y Contabilidad
Cartagena, Murcia 30201

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