Articlediamond2018

Earnings Management and State Ownership: A Primary Literature Review

Francesco Capalbo · Marco Sorrentino · Margherita Smarra

10 citations0/0 files storedInternational Journal of Business and Management

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Auditing, Earnings Management, Governance Corporate Finance and Governance Corporate Governance and Financial Management

Abstract

Purpose: State Owned Enterprises (SOEs) have a growing importance in the economic and social life of both developed and developing countries, being present in their key sectors such as telecommunication, electricity, transportation. The purpose of this paper is to offer a comprehensive review of the up to date literature on the relation between State Ownership and Earnings management.Design/methodology/approach: An examination of the literature was undertaken to review the quantitative studies that analyze the existence or the non-existence of a relation between State Ownership and Earnings management, comparing population and data set used, methodology applied and result achieved. To find studies relevant to the issue, we utilized Google Scholar and delimited the research to 20 top Scholarly Journals, over the interval 1996-2016.Findings: The available literature seems to offer contrasting viewpoints regarding the relationship between public ownership and earnings management, even though studies generally show a slight prevalence towards a negative relationship. This means that the quality of the earnings published in the budgets of public owned enterprises must be slightly higher than the earnings published by private companies.Research limitations/implications: Almost all studies reviewed present limitations that hinder the assumption of general rules regarding the obtained results. At the same time, the different studies do not always use the same system to measure earnings management activities.Practical implications: The paper might offer interesting implications for central and local governments, in order to influence the decisions on their intervention in the market.Originality/value: To our knowledge, this is the first study trying to attempt this emerging goal.

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1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1983Separation of Ownership and Control 1991Earnings Management During Import Relief Investigations 2005Performance matched discretionary accrual measures 1995Detecting Earnings Management.1968An Empirical Evaluation of Accounting Income Numbers 1997Industry costs of equity 2003Earnings management and investor protection: an international comparison

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