Overview

Original Research

THE IMPACT OF FOREIGN OWNERSHIP ON BOTH TYPES OF EARNINGS MANAGEMENT

MOHAMMED IDRIS 1, ABDELRAHIM NASSOURA 2, and ESRA’A AL-TRAD 3.

Vol 17, No 12 ( 2022 )   |  DOI: 10.5281/zenodo.7441861   |   Author Affiliation: Accounting Department, Applied Science Private University, Amman, Jordan 1,3; Accounting Department, Aldar University College, Ajman, United Arab Emirates 2.   |   Licensing: CC 4.0   |   Pg no: 646-658   |   To cite: MOHAMMED IDRIS, et al., (2022). THE IMPACT OF FOREIGN OWNERSHIP ON BOTH TYPES OF EARNINGS MANAGEMENT. 17(12), 646–658. https://doi.org/10.5281/zenodo.7441861   |   Published on: 15-12-2022

Abstract

In the context of emerging markets, foreign ownership is considered as an effective mechanism that could complement current governance structure because foreign investors prefer to invest in good-governed firms. Using the population of all manufacturing firms listed on Amman Stock Exchange over the period 2017 – 2021, this notion is tested in constraining manipulations in accruals, sales, production costs, and discretionary expenses. However, the results reveal that foreign investors do not reduce the practice of earnings management which is inconsistent with reducing agency problems in Jordan. Accordingly, a caution must be exercised by Jordanian regulators in the process of promoting the scrutiny over listed firms.

Keywords

Foreign Ownership, Abnormal Accruals, Abnormal Operating Cash Flows, Abnormal Production Costs, Abnormal Discretionary Expenses.