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Corporate ownership concentration and financial reporting quality

Author

Listed:
  • Neal Arthur
  • Huifa Chen
  • Qingliang Tang

Abstract

Purpose - The purpose of this study is to investigate whether a country’s ownership concentration affects the financial reporting quality in a cross-country setting. Design/methodology/approach - This paper uses six accounting and auditing indicators to construct a comprehensive index to measure the country-level financial reporting quality. Findings - The authors find a non-linear nature of the relationship between the national financial reporting quality and national ownership structure. Specifically, the relation is negative in a relatively spread ownership structure with no controlling shareholders, implying the entrenchment effects dominate. When ownership is highly concentrated, particularly with controlling shareholders whose interest is aligned with that of the firm, the relation turns to positive and alignment effects dominate. Originality/value - The study is an important extension of prior research examining the financial reporting quality effect of ownership concentration. It enhances the understanding of the role of ownership concentration in determining a country’s financial reporting quality and has potential important policy implications for countries’ reformers and regulators who are concerned with the transparency of financial reporting and the quality of corporate governance.

Suggested Citation

  • Neal Arthur & Huifa Chen & Qingliang Tang, 2019. "Corporate ownership concentration and financial reporting quality," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 17(1), pages 104-132, March.
    • Handle: RePEc:eme:jfrapp:jfra-07-2017-0051
    DOI: 10.1108/JFRA-07-2017-0051
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    Citations

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    Cited by:

    1. Lela Nurlaela Wati & Momon & Dwi Cahyono, 2023. "Double-Edged Sword of Controlling Shareholders on Politically Connected Group Business," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 75-91.
    2. Ibtihal A. Abed & Nazimah Hussin & Mostafa A. Ali & Hossam Haddad & Maha Shehadeh & Elina F. Hasan, 2022. "Creative Accounting Determinants and Financial Reporting Quality: Systematic Literature Review," Risks, MDPI, vol. 10(4), pages 1-25, April.
    3. Santanu K. Ganguli & Soumya Guha Deb, 2021. "Board composition, ownership structure and firm performance: New Indian evidence," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 18(3), pages 256-268, September.
    4. Sri Murni & Rahmawati Rahmawati & Ari Kuncara Widagdo & Eko Arief Sudaryono & Doddy Setiawan, 2023. "Effect of Family Control on Earnings Management: The Role of Leverage," Risks, MDPI, vol. 11(2), pages 1-15, January.
    5. Ozili, Peterson K, 2021. "Financial reporting under economic policy uncertainty," MPRA Paper 105089, University Library of Munich, Germany.

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