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Ownership Structure And Earnings Management: Evidence From The Casablanca Stock Exchange, Omar Farooq, Hind El Jai

Omar Farooq

Does poor legal protection of minority shareholders provide enough incentives for majority shareholders to expropriate minority shareholders and hide their unscrupulous behavior through accounting manipulations? This paper attempts to study the effect of ownership structure (ownership of the largest shareholder and identity of the largest shareholder) on earnings management in Morocco. Using annual estimates of discretionary accruals, we document that the presence of institutions as the largest shareholder has a negative impact on earnings management. Our results show that firms with foreign or local institutions as the largest shareholders engage in significantly lower earnings management than other firms. Our results …