On the impact of family versus institutional block-holders on accrual-based earnings management and firm performance: evidence from an emerging market

Abstract EN

After the passing of the Sarbanes-Oxley act and the emphasis placed by professional authorities on restricting the flexibility of accounting standards, the purpose of this paper is to investigate the extent to which family/institutional ownership has a significant impact on the manipulation of earnings and the financial performance of companies.

this research was done on 49 listed companies, involving 392 observations, whose shares were among the 100 most traded shares in Egypt from 2013 to 2020 (EG X 100 price index).

the alignment effect is supported by path analysis and multi-group analysis using structural equation modelling (SEM), which suggests that high levels of ownership encourage most types of significant shareholders to take part in company monitoring.

the results show that strong family ownership, in particular, strengthens company capability to limit the use of managers’ opportunistic discretion.

the association between institutional ownership and profits manipulations, on the other hand, is not statistically significant.

however, the results suggest that there is a large, direct, and favorable association between institutional ownership and the ROA, ROE, and ROS proxies of company value.

however, the study’s findings show that family shareholding has little effect on accounting performance.