Effects of Corporate Ownership Structure on Earnings Conservatism

Fan-Hua Kung, Chia-Ling Cheng, Kieran James



This paper investigates the incremental effects of corporate ownership structure on earnings conservatism, examining data of Chinese listed companies. We employ the concept of conditional conservatism to define earnings conservatism and adopt empirical models developed by Basu (1997) and Ball and Shivakumar (2005) to measure the degree of earnings conservatism. Our empirical results show that the earnings of companies with higher non-tradable shares have lower earnings conservatism. Consistent with prior studies, this point demonstrates that the companies with state and concentrated ownership structures are more likely to depend on private communication to reduce information asymmetry and to resolve agency problems internally, thereby creating a low demand for earnings conservatism. The results of this study contribute to our understanding of how companies’ ownership structures affect the properties of earnings in emerging markets and post-Communist markets.


Keywords: earnings conservatism, non-tradable shares, ownership structure, post-Communist studies, split-share structure, state ownership


JEL Classifications: M40, M41, M49


Full Text:

Pages 47-67

DOI: https://doi.org/10.5296/ajfa.v2i1.431

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Asian Journal of Finance & Accounting ISSN 1946-052X

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