The Relationship between Corporate Ownership Structure and Earnings Conservatism (Case study in Tehran Stock Exchange)

ABSTRACT: This paper examines the relationship between corporate ownership structure and earnings conservatism on non-financial companies that listed in Tehran Stock Exchange from 1999 to 2008. Existing literature shows that ownership structure decreases the incentive to manage earnings. And it is believed that managers have opportunities to manage reported earnings base on their benefits. Therefore, the main purpose of this paper is to analyse whether a firm’s ownership structure exacerbate or alleviate earnings management. The effect of the concentrated owners is adversely affecting the accounting information. Concentrated owners produced less informative earnings to outside users, hence reducing the credibility of the information for outside shareholders. Our finding suggested that company with higher non-tradable shares have higher conservatism. Also our research shows the effects of profitability and company size on earnings conservatism are significant. The result of profitability is consistent to theory, but company size doesn’t support theory, that expected a negative association between company size and earnings conservatism