OWNERSHIP STRUCTURE AND FINANCIAL REPORTING QUALITY IN LISTED NON-FINANCIAL FIRMS IN NIGERIA
Keywords:
Earnings Management, Financial Reporting Quality, Ownership Structure.
Abstract
The objective of this study is to appraise the effect of the ownership structure on the quality of financial reporting in Nigeria. The study used data from 41 non-financial firms listed on the Nigerian Stock Exchange (NSE) for the 2011 to 2019 period. The Generalised Method of Moments (GMM) technique was adopted for the study which is vigorous to the threat of heteroskedasticity and endogeneity. The study findings revealed that institutional and foreign ownership has a significant negative relationship with earnings management, thereby, improving the reporting quality. However, the results show that managerial ownership has an insignificant negative relationship with earnings management. The finding of this study is also robust in scope concerning the issue of unobserved heterogeneity which prior studies have failed to address. Thus, future corporate governance reforms should recognize and sustain these efforts. The study recommends that Firms should expand their institutional and foreign ownership by providing sufficient shares to them. This is important because they frequently deploy their professionalism and wealth of experience to the firms towards meeting corporate goals and agitation of good reporting practice. On the other hand, Firms should ensure that the shareholding of the insider managers is not too high in such a way that the proportion of their shareholding should be minimal. Their shares should not exceed 10% of the total shareholding in the company as it was found to be among the variables that reduce firms' performance.
JEL Classification Codes: G32.
References
Adebiyi, W. K., & Olowookere, J. K. (2016). Ownership Structure and the Quality of Financial Reporting: Evidence from Nigerian Deposit Money Banks. International Journal of Economics, Commerce and Management, 4(1), 541-552.
Amin, A. S., Dutta, S., Saadi, S., & Vora, P. P. (2015). Institutional Shareholding and Information Content of Dividend Surprises: Re-Examining the Dynamics in Dividend-Reappearance Era. Journal of Corporate Finance, 31, 152-170.
Alqatamin, R. M. (2018). Audit committee effectiveness and company performance: Evidence from Jordan. Accounting and Finance Research, 7(2), 48.
Affan, W. M., Rosidi, S. E., & Purwanti, L. (2017). The Effect of Ownership Structure on the Quality of Financial Reporting of Manufacturing Companies Listed in the IDX. Imperial Journal of Interdisciplinary Research 3(7), 34 – 46.
Al-Jaifi, H. A., Al-Rassas, A. H., & Al-Qadasi, A. (2019). Institutional Investor Preferences: Do Internal Auditing Function and Audit Committee Effectiveness Matter in Malaysia? Management Research Review, 22(1), 108-122.
Alsmady, A. A. (2018). Ownership Structure and its Endogeneity Effect on the Quality of Financial Reporting. International Journal of Academic Research in Business and Social Sciences, 8(3), 509–526.
Arowolo, R. O., & Che-Ahmad, A. (2017). Block-holders and Monitoring Mechanisms in Nigeria. Asian Journal of Accounting and Governance, 78(8), 71–78.
Bricker, R., & Markarian, G. (2015). Institutional investors and insider trading profitability. European Accounting Review, 24(3), 495-518.
Bamahros, H. M., & Wan-Hussin, W. N. (2015). Types of Institutional Investors and Earnings Management in Malaysia. Advanced Science Letters, 21(6), 2003–2006.
Bamahros, H. M., & Wan-Hussin, W. N. (2016). Types of Institutional Investors and Financial Reporting Timeliness: Empirical Study in Malaysia. International Conference on Accounting Studies, (August), 207–211.
Brooks, C., Chen, Z., & Zeng, Y. (2018). Institutional cross-ownership and corporate strategy: The case of mergers and acquisitions. Journal of Corporate Finance, 48, 187-216.
Dou, Y., Hope, O.K., Thomas, W. B., & Zou, Y. (2018). Blockholder Exit Threats and Financial Reporting Quality. Contemporary Accounting Research, 35(2), 1004–1028.
Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting earnings management. Accounting Review, 70(2), 193-225.
Elyasiani, E., Wen, Y., & Zhang, R. (2017). Institutional Ownership and Earning Management by Bank Holding Companies. Journal of Financial Research, 40(2), 147–178.
Gugong, B. K., Arugu, L. O., & Dandago, K. I. (2014). The Impact of Ownership Structure on the Financial Performance of Listed Insurance Firms in Nigeria. International Journal of Academic Research in Accounting, Finance and Management Sciences, 4(1), 409–416.
Indrarini, S., Chandrarin, G., & Subiyantoro, G. (2019). Managerial Ownership, Earnings Predictability and Firm Value on Indonesia Stock Exchange. Journal of Business and Management, 11(2), 39-46.
Jones, J. J. (1991). Earnings management during import relief investigations. Journal of accounting research, 29(2), 193-228.
Khafid, M., & Arief, S. (2017). Managerial ownership, corporate governance and earnings quality: The role of institutional ownership as moderating variable. Pertanika Journal of Social Sciences and Humanities, 25, 241-254.
Kim, K. (2010). Blockholder Monitoring and the Efficiency of Pay-Performance Benchmarking. Journal of Corporate Finance, 16(5), 748–766.
Kasznik, R. (1999). On the association between voluntary disclosure and earnings management. Journal of accounting research, 37(1), 57-81.
Lakhal, F., Aguir, A., Lakhal, N., & Malek, A. (2015). Do women on boards and in top management reduce earnings management? Evidence in France. Journal of Applied Business Research (JABR), 31(3), 1107-1118.
Mamman, S., Kurfi, B. U., Audi, A. M., Amos, B., & Ahmad, A. A. (2016). Institutional Ownership and Earnings Quality: Evidence from Quoted Food / Beverages and Tobacco Firms in Nigeria. Nigerian Journal of Management Technology & Development, 7(1) 87-101.
Ongore, V. O., K’Obonyo, P. O., Ogutu, G. (2011). Implications of Firm Ownership Identity and Managerial Discretion on Financial Performance: Empirical Evidence from Nairobi Stock Exchange. International Journal of Humanities and Social Science, 1(13), 187- 195.
Okafor, I. G., Ugochukwu, U. S., & Chijindu, E. H. (2016). Foreign capital inflows and Nigerian economic growth nexus: A Toda Yamamoto approach. European Journal of Accounting, Auditing and Finance Research, 4(3), 16-26.
Saifullah, M. A., Mohammed, A., & Usman, S. H. (2015). Ownership Diversity and Corporate Performance: Evidence from Nigerian Conglomerates Firms. Journal of Basic and Applied Research, 1(1), 89–101.
Sepasi, S., Kazempour, M., & Mansourlakoraj, R. (2016). Ownership Structure and Disclosure Quality: Case of Iran. 1st International Conference on Applied Economics and Business, Procedia Economics and Finance, 36(16), 108 – 112.
Sulong, Z., John, C., Gardner, A.H.H., Zuraidah, M.S., & Carl, B.M. (2013). Managerial Ownership, Leverage and Audit Quality Impact on Firm Performance: Evidence from the Malaysian Ace Market. Accounting & Taxation Journal, 5(1), 59-70.
Sultana, N., Singh, H., & Van der Zahn, J. L. M. (2015). Audit committee characteristics and audit report lag. International Journal of Auditing, 19(2), 72-87.
Uche, C. O., Adegbite, E., & Jones, M. (2016). Institutional shareholder activism in Nigeria: An accountability perspective. Accounting Forum, 40(2), 78–88.
Wahyu, A.A., Budiyanto, S. N., & Nur, F. A. (2016). Ownership Structure in the Effect of Diversification Strategy on Capital Structure and Financial Performance of Companies Listed in Indonesia Stock Exchange, International Journal of Economics, Commerce and Management, 6(7), 344-371.
Yaghoobi, A., & Khansalar, E. (2016). Review of the Relationship between Ownership Structure and Economic Performance Criteria in Companies Listed on Tehran Stock Exchange. International Journal of Economics and Finance, 8(6), 89-99.
Yanida, M., & Widyatama, A. (2019). Does Corporate Governance Increase Financial Reporting Quality? Journal of Business: Theory and Practice, 3(5), 16-30.
Yurisandi, T., & Puspitasari, E. (2015). Financial Reporting Quality—Before and After IFRS Adoption Using Nice Qualitative Characteristics Measurement. Procedia-Social Behavioral Sciences, 21(1), 644-652.
Yusuf, I., Tambaya, U. Y., & Badamasi, M. (2016). Corporate Governance and Performance of Listed Deposit Money Banks in Nigeria. Institutional Frameworks, Building and National Development (IFBND) Conference 2016, 278 – 288.
Amin, A. S., Dutta, S., Saadi, S., & Vora, P. P. (2015). Institutional Shareholding and Information Content of Dividend Surprises: Re-Examining the Dynamics in Dividend-Reappearance Era. Journal of Corporate Finance, 31, 152-170.
Alqatamin, R. M. (2018). Audit committee effectiveness and company performance: Evidence from Jordan. Accounting and Finance Research, 7(2), 48.
Affan, W. M., Rosidi, S. E., & Purwanti, L. (2017). The Effect of Ownership Structure on the Quality of Financial Reporting of Manufacturing Companies Listed in the IDX. Imperial Journal of Interdisciplinary Research 3(7), 34 – 46.
Al-Jaifi, H. A., Al-Rassas, A. H., & Al-Qadasi, A. (2019). Institutional Investor Preferences: Do Internal Auditing Function and Audit Committee Effectiveness Matter in Malaysia? Management Research Review, 22(1), 108-122.
Alsmady, A. A. (2018). Ownership Structure and its Endogeneity Effect on the Quality of Financial Reporting. International Journal of Academic Research in Business and Social Sciences, 8(3), 509–526.
Arowolo, R. O., & Che-Ahmad, A. (2017). Block-holders and Monitoring Mechanisms in Nigeria. Asian Journal of Accounting and Governance, 78(8), 71–78.
Bricker, R., & Markarian, G. (2015). Institutional investors and insider trading profitability. European Accounting Review, 24(3), 495-518.
Bamahros, H. M., & Wan-Hussin, W. N. (2015). Types of Institutional Investors and Earnings Management in Malaysia. Advanced Science Letters, 21(6), 2003–2006.
Bamahros, H. M., & Wan-Hussin, W. N. (2016). Types of Institutional Investors and Financial Reporting Timeliness: Empirical Study in Malaysia. International Conference on Accounting Studies, (August), 207–211.
Brooks, C., Chen, Z., & Zeng, Y. (2018). Institutional cross-ownership and corporate strategy: The case of mergers and acquisitions. Journal of Corporate Finance, 48, 187-216.
Dou, Y., Hope, O.K., Thomas, W. B., & Zou, Y. (2018). Blockholder Exit Threats and Financial Reporting Quality. Contemporary Accounting Research, 35(2), 1004–1028.
Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting earnings management. Accounting Review, 70(2), 193-225.
Elyasiani, E., Wen, Y., & Zhang, R. (2017). Institutional Ownership and Earning Management by Bank Holding Companies. Journal of Financial Research, 40(2), 147–178.
Gugong, B. K., Arugu, L. O., & Dandago, K. I. (2014). The Impact of Ownership Structure on the Financial Performance of Listed Insurance Firms in Nigeria. International Journal of Academic Research in Accounting, Finance and Management Sciences, 4(1), 409–416.
Indrarini, S., Chandrarin, G., & Subiyantoro, G. (2019). Managerial Ownership, Earnings Predictability and Firm Value on Indonesia Stock Exchange. Journal of Business and Management, 11(2), 39-46.
Jones, J. J. (1991). Earnings management during import relief investigations. Journal of accounting research, 29(2), 193-228.
Khafid, M., & Arief, S. (2017). Managerial ownership, corporate governance and earnings quality: The role of institutional ownership as moderating variable. Pertanika Journal of Social Sciences and Humanities, 25, 241-254.
Kim, K. (2010). Blockholder Monitoring and the Efficiency of Pay-Performance Benchmarking. Journal of Corporate Finance, 16(5), 748–766.
Kasznik, R. (1999). On the association between voluntary disclosure and earnings management. Journal of accounting research, 37(1), 57-81.
Lakhal, F., Aguir, A., Lakhal, N., & Malek, A. (2015). Do women on boards and in top management reduce earnings management? Evidence in France. Journal of Applied Business Research (JABR), 31(3), 1107-1118.
Mamman, S., Kurfi, B. U., Audi, A. M., Amos, B., & Ahmad, A. A. (2016). Institutional Ownership and Earnings Quality: Evidence from Quoted Food / Beverages and Tobacco Firms in Nigeria. Nigerian Journal of Management Technology & Development, 7(1) 87-101.
Ongore, V. O., K’Obonyo, P. O., Ogutu, G. (2011). Implications of Firm Ownership Identity and Managerial Discretion on Financial Performance: Empirical Evidence from Nairobi Stock Exchange. International Journal of Humanities and Social Science, 1(13), 187- 195.
Okafor, I. G., Ugochukwu, U. S., & Chijindu, E. H. (2016). Foreign capital inflows and Nigerian economic growth nexus: A Toda Yamamoto approach. European Journal of Accounting, Auditing and Finance Research, 4(3), 16-26.
Saifullah, M. A., Mohammed, A., & Usman, S. H. (2015). Ownership Diversity and Corporate Performance: Evidence from Nigerian Conglomerates Firms. Journal of Basic and Applied Research, 1(1), 89–101.
Sepasi, S., Kazempour, M., & Mansourlakoraj, R. (2016). Ownership Structure and Disclosure Quality: Case of Iran. 1st International Conference on Applied Economics and Business, Procedia Economics and Finance, 36(16), 108 – 112.
Sulong, Z., John, C., Gardner, A.H.H., Zuraidah, M.S., & Carl, B.M. (2013). Managerial Ownership, Leverage and Audit Quality Impact on Firm Performance: Evidence from the Malaysian Ace Market. Accounting & Taxation Journal, 5(1), 59-70.
Sultana, N., Singh, H., & Van der Zahn, J. L. M. (2015). Audit committee characteristics and audit report lag. International Journal of Auditing, 19(2), 72-87.
Uche, C. O., Adegbite, E., & Jones, M. (2016). Institutional shareholder activism in Nigeria: An accountability perspective. Accounting Forum, 40(2), 78–88.
Wahyu, A.A., Budiyanto, S. N., & Nur, F. A. (2016). Ownership Structure in the Effect of Diversification Strategy on Capital Structure and Financial Performance of Companies Listed in Indonesia Stock Exchange, International Journal of Economics, Commerce and Management, 6(7), 344-371.
Yaghoobi, A., & Khansalar, E. (2016). Review of the Relationship between Ownership Structure and Economic Performance Criteria in Companies Listed on Tehran Stock Exchange. International Journal of Economics and Finance, 8(6), 89-99.
Yanida, M., & Widyatama, A. (2019). Does Corporate Governance Increase Financial Reporting Quality? Journal of Business: Theory and Practice, 3(5), 16-30.
Yurisandi, T., & Puspitasari, E. (2015). Financial Reporting Quality—Before and After IFRS Adoption Using Nice Qualitative Characteristics Measurement. Procedia-Social Behavioral Sciences, 21(1), 644-652.
Yusuf, I., Tambaya, U. Y., & Badamasi, M. (2016). Corporate Governance and Performance of Listed Deposit Money Banks in Nigeria. Institutional Frameworks, Building and National Development (IFBND) Conference 2016, 278 – 288.
Published
2021-12-31
How to Cite
Kurawa, J. M., Alhassan, I., Islam, K. M. A., & Haque, M. S. (2021). OWNERSHIP STRUCTURE AND FINANCIAL REPORTING QUALITY IN LISTED NON-FINANCIAL FIRMS IN NIGERIA. International Journal of Accounting & Finance Review, 9(1), 57-73. https://doi.org/10.46281/ijafr.v9i1.1547
Section
Regular Research Article/ Short Communication Article
Copyright (c) 2021 Junaidu Muhammad Kurawa, Ismail Alhassan, K. M. Anwarul Islam, Md. Shariful Haque
This work is licensed under a Creative Commons Attribution 4.0 International License.
