Ownership structure and earnings management in Moroccan listed companies

Abstract

The aim of this article is to investigate the link between ownership structure and earnings management for a sample of companies listed on the Casablanca stock exchange during the period 2010-2015. The existing literature highlights an effective role of certain types of ownership in monitoring managerial discretion although the empirical results remain mixed. We focus on three specific types of ownership: blockholders, institutional and managerial ownership. Regarding earnings management, we choose, as an indicator, the absolute value of discretionary accruals. Our results highlight a negative and significant relationship between blockholders' ownership and discretionary accruals, suggesting that blockholders may play an active role in limiting managers' opportunistic behaviour. Similarly, we find that institutional ownership is negatively associated with earnings management, which confirm that it can contribute to limit this form of accounting manipulations. On the other hand, we found no significant relationship between managerial ownership and earnings management, unlike the agency theory predictions which suggests that this type of ownership may help to align the interests of shareholders with those of managers.