This study examines the relation between managerial ownership structure and earnings management. Unlike previous research which treats insiders as a homogeneous group, we further classify insiders into executives, outside directors, and blockholders to conduct an in-depth study. Earnings management is captured by discretionary accruals that are estimated using the modified Jones model. For a large sample of Taiwanese listed firms over the period 1997 and 2004, we find that discretionary accruals first increase and then decrease with executive ownership, forming an inverted U-shaped relationship. However, discretionary accruals are positively affected by director ownership and blockholder ownership. The results suggest that equity stake owned by top officers of a firm should be encouraged in order to reduce agency cost, thus enhancing information content of earnings.

Purpose -The purpose of this paper is to examine empirically whether corporate governance mechanisms have an effect on income-smoothing behavior in the People's Republic of China. Design/methodology/approach -The sample comprises 1,358 companies listed in the Shanghai Stock Exchange and the Shenzhen Stock Market during the period 1999 to 2006. By comparing the variability of income to the variability of sales, an income smoother can be identified if income is less variable than sales. Findings -The authors' empirical results show that income smoothing is more severe when the state is the controlling shareholder of the Chinese listed firm. Firms with more independent directors are more likely to engage in income smoothing. The governance mechanisms such as board of directors, supervisory board, audit committee, external auditors, and shareholders' participation are not effective in curtailing income smoothing in China. Practical implications -For Chinese firms and especially government-linked enterprises, the way in which they present themselves may be significant, since the image they present to potential strategic partners may be marred by suspicions of income smoothing. Originality/value -The paper presents the current development of China's corporate governance system and indicates that agency conflicts between controlling shareholders and minority investors account for a significant portion of earnings management in China.

In the context of agency theory (Jensen and Meckling, 1976. "Journal of Financial Economics", 3, 305-360), how insider stock ownership relates to firm performance is explored in this paper. The relevant performance measure used is total factor productivity. Insiders are classified into executives, board members and blockholders so as to facilitate a detailed study. Five-year (1996-2000) panel data of 333 Taiwanese listed electronics firms are examined. It is observed that total insider ownership remains steady while the executive-to-insider holding ratio increases significantly. In terms of the effect on total factor productivity, neither the total insider ownership nor the board-to-insider holding ratio shows any influence on productivity. However, productivity first decreases then increases with the executive-to-insider holding ratio, forming a U-shaped relationship. The results indicate that stock ownership of top officers in high-tech firms should be encouraged to enhance productivity. Copyright Blackwell Publishing Ltd 2005.

This paper applies agency theory to explore the relationship between insider stock ownership and firm performance, particularly in terms of technical efficiency. Insiders are further classified into executives, outside directors, and large shareholders to conduct a detailed study. Six-year (1996-2001) panel data of 416 Taiwanese listed electronics firms are examined by the stochastic production frontier approach. It is observed that raising the executive-to-insider holding ratio first causes a decrease and then an increase in technical efficiency, forming a U-shaped relationship. However, the board-to-insider holding ratio is negatively associated with technical efficiency. The results indicate that equity ownership of top officers in high-tech firms should be encouraged to enhance firm productivity. Copyright © 2005 John Wiley & Sons, Ltd.