Nexus between ownership structure and earnings management: Evidence from Pakistan


  • Aziza Naz IMS.BZU
  • Nadeem Ahmed Sheikh (PhD)
  • Nadeem Iqbal (PhD) Air University, Islamabad,Pakistan


This study explores whether ownership structure (i.e. managerial, institutional, foreign, and blockholders) affects accruals (AEM) and real earnings management (REM). Data were collected from annual reports of non-financial firms listed on PSX during 2010-2019. Pooled ordinary least squares method used to estimate the impact of ownership structure on AEM and REM. Results show that managerial ownership and blockholders ownership are significant and negatively related to AEM. Alternatively, institutional ownership and foreign ownership are positively related to AEM. It is essential to mention that the findings of this study are mixed related to the impact of ownership structure on different proxies of REM. For instance, managerial ownership is positively related to abnormal cash flow (AbCFO) and negatively related to abnormal discretionary expense (AbDExp). Institutional ownership is negatively linked to AbCFO and abnormal production cost (AbPC). Foreign ownership is positively related to AbCFO. Similarly, blockholders' ownership is positively related to AbPC and AbDExp. In brief, ownership structure has material effects on earnings management. Results of this study may lend-a-hand to policymakers and regulatory authorities to understand how managers manipulate earnings by residing in the ambit of reporting standards.