EQUITY OWNERSHIP STRUCTURE AND EARNINGS MANAGEMENT IN SOME SELECTED QUOTED MANUFACTURING COMPANIES IN NIGERIA
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- NGN 3000
ABSTRACT
The objective of the study was to examine the impact of equity ownership structure and earnings management on some selected quoted manufacturing companies, taking into consideration the challenges of rewarding investors adequately which is a topical issue in the modern business Ownership structure and earnings management was evaluated in determining the rewarding process to equity owners and contribute positively to the growth of the organization. The specific objectives of the research were to examine the influence of managerial equity ownership structure on earnings management, determine the impact of foreign equity ownership on earnings management, ascertain the influence of institutional equity ownership on earnings management, investigate the effect of concentrated ownership on earnings management and to ascertain the presence of monotonicity in the relationship between equity ownership and earnings management in Nigeria. In carrying out the research work, the following hypothesis tested are: managerial equity had no significant relationship with earnings management, foreign equity ownership had no significant relationship with earnings management; Institutional equity ownership had no significant relationship on earnings management; concentrated ownership had no significant relationship with earnings management; and there was no monotonicity in the relationship between equity ownership and earnings management. The study employed a research design of objectivist perspective and positivity was used with a population of 64 forms quoted on Nigeria stock exchange through a longitudinal research design using secondary data retrieved from listed manufacturing firms quoted on the Nigerian Stock Exchange. A sample of 64 manufacturing firms which actually covered the population was used for the study with a time period between 2009-2019. The panel regression analysis technique was used in the estimation of the specified models alongside Robust Statistics to address potential outliers after a preliminary analysis such as descriptive statistics. Correlation analysis, panel co-integration analysis and variance inflation factor test were conducted. The outcome of the research revealed that managerial equity ownership (MOWN) had a negative effect on earnings management and it was statistically significant at 5%. The result thus confirmed that an increase in managerial equity ownership resulted in a decline in earnings management. Furthermore, the estimation results showed that Institutional equity ownership (IOWN) had a positive effect on earnings management and it was statistically significant at 5%. The effect of foreign ownership (FOWN) was negative and statistically significant at 5%. Also, the result indicated that foreign ownership presence could be effective in constraining the opportunistic practices of managers in the form profit repatriation at the determent of other investors. While concentrated ownership (COWN) had a negative effect on earnings management and was statistically significant at 5%, the study’s results confirms the presence of non-monotonicity and a curvilinear pattern in the behaviour of managerial ownership in relation to an increase in its percentage share, and how it affected earnings management. Therefore, the study recommended a more direct institutional monitoring by promoters and not only should foreign equity ownership be employed by companies, it should also be regulated by statutory agencies appointed by Government so as to avoid a situation where nationalistic interests were sidelined in favour of profit repatriation which was often the practice of foreign owned and dominated public interest entities (PIE’s). The study thus recommends for increase in concentrated shareholding But should also be regulated not to exceed 10% shareholding. The study further recommended that to keep the effect of managerial equity within the alignment space, ownership equity should be maintained at moderate and not higher levels.
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