Abstract:If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series … Show more
“…Further, knowledge workers are often highly paid and attractive to other competing firms and often look for opportunities in terms of better working conditions, salary, and skill-development (Nair & Vohra, 2010). With respect to knowledge work, the outcome or output of the work itself is difficult to monitor as knowledge resides within the individual and are often tacit in nature (Mitchell & Meacheam, 2011). Therefore, it is feasible for individuals not to share their knowledge if they choose to act in their self-interest.…”
“…Further, knowledge workers are often highly paid and attractive to other competing firms and often look for opportunities in terms of better working conditions, salary, and skill-development (Nair & Vohra, 2010). With respect to knowledge work, the outcome or output of the work itself is difficult to monitor as knowledge resides within the individual and are often tacit in nature (Mitchell & Meacheam, 2011). Therefore, it is feasible for individuals not to share their knowledge if they choose to act in their self-interest.…”
“…According to Charitou et al (2016), in theory, there are two types of agency conflicts namely conflict between managers and shareholders, and conflict between minority and majority shareholders. Mitchell & Meacheam (2011) stated that these conflicts arise because it is difficult for the principal to monitor every move of the agents, imperfect contract information, and information asymmetry. Jensen (1983) identified two types of agency theory.…”
Section: Theoretical Framework: An Agency Theory Perspectivementioning
Objective – This study aims to examine the relationship between ownership structure (determined by institutional and foreign ownership) and earnings management in the context of Bangladeshi Pharmaceuticals and Chemical firms.
Methodology/Technique – Out of 32 listed firms, this study examined 29 firms from the pharmaceuticals and chemical industry of Bangladesh from 2014 to 2018. Three firms are omitted as they got listed in 2018 and 2019 respectively. This study uses discretionary working capital accrual to measure earnings management that is the dependent variable. Ordinary least square regression analysis is conducted to assess the result of this study. Institutional and foreign ownership are independent variables. ROA, size, cash flow from operation, and leverage are control variables.
Findings – It is found that institutional ownership is negatively related to earnings management and foreign ownership is positively related to earnings management but none of them are statistically significant indicating institutional and foreign ownership do not help in resolving or reducing the earnings management problems in the context of Bangladeshi pharmaceuticals and chemical firms.
Novelty – Previous studies in Bangladesh deal only with the techniques of earnings management. To my knowledge, it is the first study that tries to assess the relationship of ownership structure defined by institutional and foreign shareholdings with earnings management in the context of Bangladeshi pharmaceuticals and chemical firms. These two ownership patterns are selected because they are supposed to increase the quality of financial information and also because in Bangladesh state and general shareholders are too dispersed to monitor the governance issues. The practical implications of this study is that investors should not consider institutional and foreign ownership percentage as a determining factor of good governance when considering investment decisions rather should look for other firm-specific factors as institutional and foreign shareholders are found to be inactive in increasing the quality of financial information in the context of Bangladesh. Policymakers should identify why institutional and foreign shareholders are not active and should revise the governance mechanisms accordingly.
Type of Paper: Empirical
Keywords: Ownership structure; Institutional Shareholdings; Foreign Shareholdings; Earnings Management; Bangladesh.
Reference to this paper should be made as follows: Hossain, D.A. 2020. Ownership Structure and earnings management: Empirical evidence from listed pharmaceuticals and chemical firms of Bangladesh, J. Fin. Bank. Review, 5 (2): 58 – 69 https://doi.org/10.35609/jfbr.2020.5.2(3)
JEL Classification: G40; G41; G49.
“…This behavior can cause problems for the company due to the occurrence of asymmetrical information between management and principal (Jensen & Meckling, 1976). Mitchell and Meacheam (2011) stated that the focus of agency theory stems from assumptions that the agent will behave opportunistically, particulary if their interest conflict with the principal. This conflicts can be reduce by the presence of outside investors by monitoring and supervision activities of the firms (Jensen & Meckling, 1976;Mustapha & Ahmad, 2011).…”
This is an Open Access article distributed under the terms of the Creative Commons Attribution-Noncommercial 4.0 Unported License, permitting all non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.