Available online at ScienceDirect. Procedia Economics and Finance 31 ( 2015 )

Available online at www.sciencedirect.com ScienceDirect Procedia Economics and Finance 31 ( 2015 ) 618 624 INTERNATIONAL ACCOUNTING AND BUSINESS CONFERENCE 2015, IABC 2015 Earnings Management and Ownership Structure Soheil Kazemian a, Zuraidah Mohd Sanusi b * a,b Accounting Research Institute (ARI), Universiti Teknology Mara (UiTM), ShahAlam, Malaysia. Abstract Earnings management research has a long and rich history. The agency conflict, incentives, rationalization, opportunity plus having the capability among the managers to manipulate the financial statement lead them to commit fraud. The loopholes in the standards or the deviation from real operational activities promote this situation to prolong. According to the agency theory, separation of ownership and control gives rise to manager s incentives to select and apply accounting estimates and techniques that can increase their own wealth. This issue has become more important in recent years as more firms are listed on stock exchanges as public firms. In this review, we emphasize studies that advance the managerial understanding of the earnings management and agency theory. This paper aims at reviewing on some major conducted research from various countries, examining relationships between ownership structure (and its subsets) and earnings management. The results of the paper further extend the literatures in understanding the determination of the influences of ownership structure and earnings management. 2015 The Authors. Published by by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of Universiti Teknologi MARA Johor. Peer-review under responsibility of Universiti Teknologi MARA Johor Keywords: Agency Theory, Earnings management, Ownership Structure. 1. INTRODUCTION In a world characterised by imperfect information and costly monitoring, a divergence of interests between shareholders and management can lead to suboptimal management decisions. Such decisions are possible because the actions of managers are largely unobservable and the goals of the managers and their shareholders are not necessarily aligned. Managers are posited to opportunistically manage earnings to maximise their utility at the expense of other stakeholders. Agency theory suggests that the monitoring mechanisms can improve the alignment * Corresponding author E-mail address: Soheil.kazemian@yahoo.com 2212-5671 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of Universiti Teknologi MARA Johor doi:10.1016/s2212-5671(15)01149-1

Soheil Kazemian and Zuraidah Mohd Sanusi / Procedia Economics and Finance 31 ( 2015 ) 618 624 619 of management and shareholders interests and mitigate any opportunistic behaviour resulting from conflict of interests. The agency problem between shareholders and managers, raised by Berle and Gardiner (1968), as a result of dispersed shareholders in large enterprises; arises when the contributors of the funds need to finance investment, while assuming the risk of acquiring business and ownership of the company, and they are forced to entrust supervision and direction to someone who possesses the qualifications and skills needed to perform this function. If the shareholders have complete information on investment opportunities, presented to the organization and company managers, they could design complete contracts that did not give full scope for the discretion of the board of directors. But this is not true and the actions of management and investment opportunities are not perfectly observable by the owners, as a result, managers can engage in an opposite conduct to the owners interests. In other words, managers have incentives to expropriate the company s profits, through projects that benefit them but may have adversely impacted shareholders (Fama, 1980; Jensen & Meckling, 1979). A conflict of interests has potential agency cost such as management decisions that do not maximize shareholder s interests. Managers may manage reported earnings to justify their actions. Earnings management may lead to an agency cost where investors make non-optimal investment decisions from reported earnings. In a situation where a company has a high free cash flow, the manager may be engaged in earnings management to show better performance of the company. This relation can be explained by using agency theory. In this contractual context, characterized by the conflict of interests between shareholders and managers, corporate governance involves the design series mechanisms that reconcile the interests of shareholders and managers (Fama & Jensen, 1983; Hart, 1995; Myers, 1977), thus avoiding the management that seeks to maximize his or her utility function even at the expense of shareholder s wealth. There is, in turn, a relationship between fund sources and investment, that holds both when firms face positive NPV opportunities and when they do not. A clear relationship between ownership structure and managers discretionary accruals can be seen, being the measure of earnings management, an important and continuing debate in the literature on corporate governance. However, a growing body of literature has shown how the relation between earnings management and financial decisions is strongly conditional on the growth opportunities open to the firm (Bukit & Iskandar, 2009; Chen & Liu, 2010; Lang, Ofek, & Stulz, 1996; McConnell & Servaes, 1995; Smith & Watts, 1992). But much less is known about how this relationship is influenced by ownership structure, particularly family ownership. This is an important issue because a new conflict of interests can arise between majority controlling shareholders and minority shareholders, since the fundamental agency problem for listed companies in emerging markets is not a conflict of interest between outside investors and managers as argued by Berle and Means (1932), but a conflict of interest between controlling shareholders and minority shareholders (Shleifer & Vishny, 1997). Moreover, accounting earnings is considered as one of the main indicators of financial performance of a firm. Naturally, the phenomenon of earnings management has already drawn the attention of academic researchers, financial markets regulators, operators and investors. Previous studies have focused mainly on the incentives of earnings management. The most important incentives investigated in prior literature include: compensation contracts (Cohen, Dey, & Lys, 2008; Guidry, Leone, & Rock, 1999; Healy, 1985; Holthausen, Larcker, & Sloan, 1995), reduce political costs (Key, 1997; Patten & Trompeter, 2003), signal manager s private information (Louis & White, 2007), avoid losses (Burgstahler & Dichev, 1997; Burgstahler & Eames, 2003), meet analysts forecasts (Burgstahler & Eames, 2006; Dhaliwal, Gleason, & Mills, 2004), avoid debt covenant violations (Jaggi & Lee, 2002), initial public offerings (Ball & Shivakumar, 2008; Roosenboom, van der Goot, & Mertens, 2003), and stock-financed acquisitions (Erickson & Wang, 1999; Savor & Lu, 2009). However, a variety of factors do exist which limit earnings management. In fact, some studies have indicated that certain corporate governance factors have an impact on corporate accounting behaviour, including earnings management (Bushman, Chen, Engel, & Smith, 2004; Cornett, Marcus, & Tehranian, 2008; Dechow, Sloan, & Sweeney, 1996). For example, Warfield, Wild, and Wild (1995) argue that managers who own a significant portion in the equity of a firm have less incentive to manipulate reported accounting information. Dechow et al. (1996) suggest that large block-holders of shares improve credibility of a firm s financial statements by providing close scrutiny over its earnings management activity. Balsam, Bartov, and Marquardt (2002) state that institutional investors, who are sophisticated investors, are more capable of detecting earnings management that non-institutional

620 Soheil Kazemian and Zuraidah Mohd Sanusi / Procedia Economics and Finance 31 ( 2015 ) 618 624 investors because they have more access to timely and relevant information. Chung, Firth, and Kim (2002) find that the institutional shareholdings inhibit managers from managing accruals to achieve desired level of earnings. These studies suggest that a firm s ownership structure have a significant impact on the magnitude of earnings management and earnings quality. This review essay evaluates some major recent studies in this rapidly growing field, from several different countries. In order to achieve this goal, the paper is structured as follows. It starts with an introduction. In the next section we provide an overview of the literature review about the relationship between agency theory and earnings management. An in-depth discussion about the relationship between institutional ownership and the agency theory is presented in section 3. Then, we consider the main discussion about the relationship between ownership structure and earnings management through reviewing and analyzing the previous body of literature in the fourth section. Conclusion of this study is discussed in section 5. 2. AGENCY THEORY AND EARNINGS MANAGEMENT The debate about the impact of governance mechanisms on earnings management should be placed in the context of the agency problem arising from the ownership and control separation, creating interests asymmetries between managers and shareholders (Jensen & Meckling, 1979). When managers do not own the company, their behavior is affected by self-interest that put off their goals of maximizing company value and, consequently, the interests of the shareholders or owners (Ali, Salleh, & Hassan, 2010; Chen & Liu, 2010; Eldenburg, Gunny, Hee, & Soderstrom, 2011; Fama, 1980; Fama & Jensen, 1983). Consequently, agency theory suggests that a separation between ownership and control, leads to a divergence between manager and owner interests (Jensen & Meckling, 1979). Conflicts of interest among principles (shareholders) and agents (managers) frequently happen. The agency problem becomes more evident on both the managers and shareholders, because the presumption is that managers will not act in the best interest of the shareholders (Bukit & Iskandar, 2009). Thus, monitoring managerial decisions becomes essential to assure that shareholders interests are protected (Fama & Jensen, 1983). In this sense, the separation between ownership and control is the main problem as to avoid possible opportunistic behavior of managers that tend to reduce the firm value. In this respect, the literature on corporate governance emphasizes the mechanisms available to protect investors rights (Chung et al., 2002; Shleifer & Vishny, 1997). A usual classification scheme makes a difference between external and internal control mechanisms. Whereas the market for corporate control is widely known as being the most outstanding external mechanism, there is a number of possible internal mechanisms such as capital, ownership structure and board which have been proved to discipline firm managers (Reyna, 2012). 3. INSTITUTIONAL OWNERSHIP AND AGENCY THEORY Agency theory suggests that monitoring by institutional ownership can be an important governance mechanism (the efficient monitoring hypothesis). In fact, institutional investors can provide active monitoring that is difficult for smaller, more passive or less-informed investors (Almazan, Hartzell, & Starks, 2005). Additionally, institutional investors have the opportunity, resources, and ability to monitor managers. Therefore, the efficient monitoring suggest that institutional ownership is associated with a better monitoring of management activities, reducing the ability of managers to opportunistically manipulate earnings. The efficient monitoring hypothesis suggests an inverse relationship between a firm s earnings management activity and its institutional share ownership. In this vein, several studies document that institutional ownership inhibits managers to opportunistically engage in earnings management (Bange & De Bondt, 1998; Bushee, 1998; Chung et al., 2002; Cornett et al., 2008; Ebrahim, 2007; Koh, 2003). However, some argue that institutional investors do not play an active role in monitoring management activities (Claessens & Fan, 2002; Porter, 1992). According to Duggal and Millar (1999, p. 106), institutional investors are passive investors who are more likely to sell their holdings in poorly performing firms than to expend their resources in monitoring and improving their performance. Institutional investors may be incapable of exerting their monitoring role and vote against managers because it may affect their business relationships with the firm.

Soheil Kazemian and Zuraidah Mohd Sanusi / Procedia Economics and Finance 31 ( 2015 ) 618 624 621 Accordingly, institutional investors may collude with management (Pound, 1988; Sundaramurthy, Rhoades, & Rechner, 2005). It is also argued that institutional owners are overly focused on short-term financial results, and as such, they are unable to monitor management (Bushee, 1998; Porter, 1992). So, there will be a pressure on management to meet short-term earnings expectations. These arguments indicate that institutional investors may not limit managers earnings management discretion and may increase managerial incentives to engage in earnings management (passive hands-off hypothesis). 4. EARNINGS MANAGEMENT AND OWNERSHIP STRUCTURE IN DIFFERENT COUNTRIES As discussed above the issue of misreporting financial data and earnings management has become more nourished in recent years. Several studies have been conducted determining influences of institutional ownership structure and earnings management in various countries. This section reviews and analyses some major conducted research. Reyna (2012) investigated the influence of ownership structure, board and leverage on the earnings management when companies either face, or do not face, profitable growth opportunities for a sample of 90 listed Mexican firms during the period 2005-2009. This study examined if in the presence of growth opportunities, the control mechanisms implemented by the shareholders continue operating in the same way when the manager has options to invest in projects using available cash flows (growth opportunity), or, whether control mechanisms operate differently when the manager does not have an option to invest (absence of growth opportunities). This theoretical framework has been applied to a sample of large Mexican firms publicly traded in capital markets for the 2005 2009 periods, examining if control mechanisms implemented by the shareholders operate differently on earnings management with the presence or absence of growth opportunities. According to this research, the issue of ultimate controlling shareholders is bolded in Mexico, because managers of Mexican corporations are usually related to the family of the controlling shareholder. They document that Mexican companies present a higher ownership concentration and many firms are directly or indirectly controlled by one of the numerous industrial conglomerates. A conglomerate is a group of firms linked to each other through ownership relations and controlled by a local family or a group of investors. Usually, conglomerates are controlled by the dominant shareholders through relatively complex structures including the use of pyramids, cross-holdings and dual class shares. The results show that ownership structure, leverage and board of directors affect earnings management as well as the type of influence depends on the presence or absence of investment opportunities. Family ownership, composition and size of board and leverage play a dual role: reduce the earnings management when there are no investments projects, but impact positively with the presence of growth opportunities. In other words, when there are no growths opportunities, governance mechanisms (ownership, board and debt) play an important role in reducing the interest conflict mentioned above since undertaking unprofitable projects or perquisite consumption might exacerbate these agency problems. However, a problem of wealth expropriation is arising between majority and minority shareholders in firms with mayor growth opportunities. Ownership concentration, debt and board of directors act as disciplinary mechanisms only in firms with absence of growth opportunities because firms with more investment opportunities and greater access to positive net present value projects are more difficult to observe and monitor. As a result of this lower observability of managers activities and higher probability for managers opportunistic behavior, growth firms will be more risky than their non-growth counterparts. Moreover, controls in high-growth firms are less likely to be effective, given the control system that has been installed may keep pace only with the original scale of operations. To sum up, the study confirms the relationship between control mechanism, earnings management and growth opportunities. However, Alves (2012) who has examined the relationship between corporate ownership structure in Portugal and earnings management, got partly different results from Reyna (2012). This research aimed to analyse whether a firm s ownership structure (measured with three variables: managerial ownership, ownership concentration and institutional ownership) exacerbate or alleviate earnings management. Using a sample of 34 Euronext Lisbon nonfinancial firms over a period of 6 years, from 2002 through 2007 (204 firm-year observations). The study found that discretionary accruals as a proxy for earnings management is negatively related both to managerial ownership and to ownership concentration. Specifically, the results of this study show that both managerial ownership and ownership

622 Soheil Kazemian and Zuraidah Mohd Sanusi / Procedia Economics and Finance 31 ( 2015 ) 618 624 concentration inhibit earnings management. This result is consistent with both the alignment of interest hypothesis, which suggests that managers who own a significant portion of the equity in a firm have less incentive to manipulate reported accounting information, and the efficient monitoring hypothesis, which suggests that large shareholders reduce the scope of managerial opportunism. Moreover, the results also reveal that there is less earnings management when operating cash flows are high and that there is more earnings management when political costs, leverage and board size are high. In sum, the findings highlight the importance of ownership structure, mainly managerial ownership and ownership concentration, in constraining the likelihood of earnings management in Portugal. Therefore, this study indicates that both managerial ownership and ownership concentration affect the informational quality of earnings positively, and consequently enhance the quality and value relevance of published financial data. In another major study, Al-Fayoumi, Abuzayed, and Alexander (2010) reported that insider ownership is significant and positively affect earnings management. This research determined the relationship between earnings management and ownership structure for a sample of Jordanian industrial firms. The sample used in this study comprises the 39 listed industrial firms analysis, which represents around 64% of Jordanian Industrial firms, in Amman stock exchange between 2001 and 2005. In this study earnings management is measured by discretionary accruals. The three types of ownership studied are; insiders, institutions and block-holders. This study used the Generalized Method of Moment (GMM). The results of the current research can be categorized into two parts. The first part confirms that there is a positive and significant relationship between insiders' ownership and earnings management. It means, greater ownership would provide managers with deeper entrenchment and, therefore, greater scope for opportunistic behavior. This finding indicates that Jordanian insiders tend to make discretionary accounting choices. The second part of the findings indicates that neither institutions nor block-holders have significant influences on earnings management. These results suggest that institutions and block-holders generally play a myopic role in Jordanian companies. They do not monitor effectively because they may either lack expertise or suffer from free rider problems among themselves, or strategically ally with the management. The challenges due the agency issues and earnings management have become more critical in Malaysia during recent years, as well. A recent study by Ali et al. (2010) examined the association between the level of managerial ownership and earnings management activities, represented by the magnitude of discretionary accounting accruals in Malaysian listed firms. This study argues that size may be one of the significant reasons that may affect the managerial ownership and agency conflict relationship. Therefore, the objective of this study is to investigate the role of firm size in the relationship between managerial ownership and earnings management practices. Specifically, this study addresses the question of whether the relationship between managerial ownership and earnings management is different according to firm size. Secondary data is obtained from annual reports of firms listed on Bursa Malaysia for the years ending 2002 and 2003. Firms from the finance industry and unit trusts are excluded from this study as they are subject to some unique regulations and the accruals behaviour is different compared to other firms. In total 1,001 public listed firms were chosen. Results of this study indicate that the size of the firm is a quasi moderating variable where the negative and significant relationship between the level of management ownership and discretionary accruals is weakened by a positive and significant relationship between the interaction between size of the firm and executive ownership and discretionary accruals. This indicates that although management ownership may reduce the earnings management activities, other factors such as firm size may also affect the behaviour. Managerial ownership is found to be an effective monitoring mechanism, particularly in small firms. This result suggests that managerial ownership should be encouraged in small firms so that it can be the substitute for the weakness of other corporate governance mechanisms. This study also indicates that other types of ownership play an important role in monitoring firms activities. In sum, the results show that managerial ownership is negatively associated with the magnitude of accounting accruals. However, this study finds that managerial ownership is less important in large-sized firms compared to small-sized firms. This finding suggests that large-sized firms demand and use better corporate governance mechanisms due to higher agency conflicts, and, therefore, less managerial ownership is needed for control.

Soheil Kazemian and Zuraidah Mohd Sanusi / Procedia Economics and Finance 31 ( 2015 ) 618 624 623 5. CONCLUSION This paper aims to review some major studies from previous body of literature in the fields of influences of institutional ownership on the agency conflicts and its consequences accrued for firms in different countries. In this regard, initially, two in-depth discussions were presented to clarify relationships between the agency theory and earnings management as well as institutional ownership structure using previous valuable conducted research. Many studies were reviewed within these two sections about these components. Then, several studies with almost the same objective, which was determination of the relationship between ownership structure and earnings management accrued in firms were reviewed and analysed from different countries. However, the sample size and country of each of the studies was different, but the findings of all of them were almost the same. More or less, all the research have found a significant relationship between ownership structure of the firms and accruing earnings management. This findings show that earnings management is influenced by the firms ownership structure, regardless to the environmental circumstances. JEL Classification: G01, G32 Acknowledgements The authors are grateful to Accounting Research Institute (ARI), Universiti Teknologi MARA (UiTM), Malaysia for full financial support granted to this research project References Al-Fayoumi, N., Abuzayed, B., & Alexander, D. (2010). Ownership structure and earnings management in emerging markets: The case of Jordan. International Research Journal of Finance and Economics, 38(1), 28-47. Ali, S. M., Salleh, N. M., & Hassan, M. S. (2010). Ownership structure and earnings management in Malaysian listed companies: the size effect. Asian Journal of Business and Accounting, 1(2). Almazan, A., Hartzell, J. C., & Starks, L. T. (2005). Active institutional shareholders and costs of monitoring: Evidence from executive compensation. Financial Management, 34(4), 5-34. Alves, S. (2012). Ownership structure and earnings management: Evidence from Portugal. Australasian Accounting, Business and Finance Journal, 6(1), 57-74. Ball, R., & Shivakumar, L. (2008). Earnings quality at initial public offerings. Journal of Accounting and Economics, 45(2), 324-349. Balsam, S., Bartov, E., & Marquardt, C. (2002). Accruals management, investor sophistication, and equity valuation: Evidence from 10 Q filings. Journal of Accounting Research, 40(4), 987-1012. Bange, M. M., & De Bondt, W. F. (1998). R&D budgets and corporate earnings targets. Journal of Corporate Finance, 4(2), 153-184. Berle, A. A., & Gardiner, C. (1968). Means. 1932. The Modern Corporation and private property, 204-205. Bukit, R. B., & Iskandar, T. M. (2009). Surplus free cash flow, earnings management and audit committee. International Journal of Economics and Management, 3(1), 204-223. Burgstahler, D., & Dichev, I. (1997). Earnings management to avoid earnings decreases and losses. Journal of Accounting and Economics, 24(1), 99-126. Burgstahler, D., & Eames, M. (2006). Management of earnings and analysts' forecasts to achieve zero and small positive earnings surprises. Journal of Business Finance & Accounting, 33(5 6), 633-652. Burgstahler, D., & Eames, M. J. (2003). Earnings Management to Avoid Losses and Earnings Decreases: Are Analysts Fooled?*. Contemporary Accounting Research, 20(2), 253-294. Bushee, B. J. (1998). Institutional investors, long-term investment, and earnings management. Long-term Investment, And Earnings Management (January 1998). Bushman, R., Chen, Q., Engel, E., & Smith, A. (2004). Financial accounting information, organizational complexity and corporate governance systems. Journal of Accounting and Economics, 37(2), 167-201. Chen, K., & Liu, J.-L. (2010). Earnings Management, CEO Domination, and Growth Opportunities: Evidence from Taiwan. International Journal of Public Information Systems, 6(1). Chung, R., Firth, M., & Kim, J.-B. (2002). Institutional monitoring and opportunistic earnings management. Journal of Corporate Finance, 8(1), 29-48. Claessens, S., & Fan, J. P. (2002). Corporate governance in Asia: A survey. International Review of finance, 3(2), 71-103. Cohen, D. A., Dey, A., & Lys, T. Z. (2008). Real and accrual-based earnings management in the pre-and post-sarbanes-oxley periods. The accounting review, 83(3), 757-787.

624 Soheil Kazemian and Zuraidah Mohd Sanusi / Procedia Economics and Finance 31 ( 2015 ) 618 624 Cornett, M. M., Marcus, A. J., & Tehranian, H. (2008). Corporate governance and pay-for-performance: The impact of earnings management. Journal of financial economics, 87(2), 357-373. Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1996). Causes and consequences of earnings manipulation: An analysis of firms subject to enforcement actions by the sec*. Contemporary Accounting Research, 13(1), 1-36. Dhaliwal, D. S., Gleason, C. A., & Mills, L. F. (2004). Last Chance Earnings Management: Using the Tax Expense to Meet Analysts' Forecasts*. Contemporary Accounting Research, 21(2), 431-459. Duggal, R., & Millar, J. A. (1999). Institutional ownership and firm performance: The case of bidder returns. Journal of Corporate Finance, 5(2), 103-117. Ebrahim, A. (2007). Earnings management and board activity: an additional evidence. Review of Accounting and Finance, 6(1), 42-58. Eldenburg, L. G., Gunny, K. A., Hee, K. W., & Soderstrom, N. (2011). Earnings management using real activities: evidence from nonprofit hospitals. The accounting review, 86(5), 1605-1630. Erickson, M., & Wang, S.-w. (1999). Earnings management by acquiring firms in stock for stock mergers. Journal of Accounting and Economics, 27(2), 149-176. Fama, E. F. (1980). Agency Problems and the Theory of the Firm. The journal of political economy, 288-307. Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal of Law and Economics, 301-325. Guidry, F., Leone, A. J., & Rock, S. (1999). Earnings-based bonus plans and earnings management by business-unit managers. Journal of Accounting and Economics, 26(1), 113-142. Hart, O. (1995). Firms, contracts, and financial structure: Oxford university press. Healy, P. M. (1985). The effect of bonus schemes on accounting decisions. Journal of Accounting and Economics, 7(1), 85-107. Holthausen, R. W., Larcker, D. F., & Sloan, R. G. (1995). Annual bonus schemes and the manipulation of earnings. Journal of Accounting and Economics, 19(1), 29-74. Jaggi, B., & Lee, P. (2002). Earnings management response to debt covenant violations and debt restructuring. Journal of Accounting, Auditing & Finance, 17(4), 295-324. Jensen, M. C., & Meckling, W. H. (1979). Theory of the firm: Managerial behavior, agency costs, and ownership structure: Springer. Key, K. G. (1997). Political cost incentives for earnings management in the cable television industry. Journal of Accounting and Economics, 23(3), 309-337. Koh, P.-S. (2003). On the association between institutional ownership and aggressive corporate earnings management in Australia. The British Accounting Review, 35(2), 105-128. Lang, L., Ofek, E., & Stulz, R. (1996). Leverage, investment, and firm growth. Journal of financial economics, 40(1), 3-29. Louis, H., & White, H. (2007). Do managers intentionally use repurchase tender offers to signal private information? Evidence from firm financial reporting behavior. Journal of financial economics, 85(1), 205-233. McConnell, J. J., & Servaes, H. (1995). Equity ownership and the two faces of debt. Journal of financial economics, 39(1), 131-157. Myers, S. C. (1977). Determinants of corporate borrowing. Journal of financial economics, 5(2), 147-175. Patten, D. M., & Trompeter, G. (2003). Corporate responses to political costs: an examination of the relation between environmental disclosure and earnings management. Journal of Accounting and Public Policy, 22(1), 83-94. Porter, M. E. (1992). Capital choices: Changing the way America invests in industry. Journal of Applied Corporate Finance, 5(2), 4-16. Pound, J. (1988). Proxy contests and the efficiency of shareholder oversight. Journal of financial economics, 20, 237-265. Reyna, J. M. S. M. (2012). An Empirical Examination of Ownership Structure, Earnings Management and Growth Opportunities in Mexican Market. International Journal of Business and Social Research, 2(7), 103-123. Roosenboom, P., van der Goot, T., & Mertens, G. (2003). Earnings management and initial public offerings: evidence from the Netherlands. The International Journal of Accounting, 38(3), 243-266. Savor, P. G., & Lu, Q. (2009). Do stock mergers create value for acquirers? The journal of finance, 64(3), 1061-1097. Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The journal of finance, 52(2), 737-783. Smith, C. W., & Watts, R. L. (1992). The investment opportunity set and corporate financing, dividend, and compensation policies. Journal of financial economics, 32(3), 263-292. Sundaramurthy, C., Rhoades, D. L., & Rechner, P. L. (2005). A meta-analysis of the effects of executive and institutional ownership on firm performance. Journal of Managerial Issues, 494-510. Warfield, T. D., Wild, J. J., & Wild, K. L. (1995). Managerial ownership, accounting choices, and informativeness of earnings. Journal of Accounting and Economics, 20(1), 61-91.