The Influence of Shareholding Mechanisms on Earning Management Practices: The Case of Listed Moroccan Companies

Abstract

Introduction: Shareholding mechanisms, in particular the concentration of capital and the type of shareholder, have a considerable influence on the production of accounting information. More specifically, we seek to verify whether the shareholder category and the degree of capital concentration have an impact on accounting earnings management practices.

Objectives: Our objective is to implement an analytical framework that would best explain the best choice of governance mode and enable the process of producing financial information to be steered.

Methods: Being interested in the mutual interaction between shareholder structure and the quality of financial statements, the main objective of this paper is to examine the influence of shareholder structure on the quality of financial statements in the Moroccan context, a context that is differentiated by its specific legal framework and typical governance traditions. It is in the context of these issues that this research is situated. Specifically, it attempts to find answers that correspond to the following summary questions

• Firstly: What is the relationship between the typology of the company's shareholders and the improvement in the quality of the financial statements?


• Secondly: is there a relationship between the degree of shareholder concentration and improvements in the quality of financial statements?

Results: The results obtained from a sample of all Moroccan companies listed between 2014 and 2018 indicate that these mechanisms act differently and sometimes antagonistically depending on several variables. The assessment of the quality of results was studied using discretionary models based on accruals. The main results seem to indicate that the concentration of capital in the hands of a controlling coalition contributes to improving the quality of the information produced by the company. The contribution of institutional and family shareholders to the earnings management system is open to question. The presence of these partners in the capital of Moroccan companies increases accounting data management practices. Furthermore, the results indicate that the control exercised by industrial and managerial shareholders is more effective. Finally, the presence of employees in the capital contributes to the effectiveness of the control exercised in the production of accounting information. Nevertheless, the risks of loss of confidentiality associated with such a presence limit the contribution of this mechanism to the system of governance as a whole.

Conclusions: The results of the assessments carried out can be summarised as follows:

-  The concentration of capital in the hands of controlling shareholders improves the quality of information produced by the company. However, the reference shareholder may opt for earnings management practices in order to gain private profits.

-  The contribution of institutional and family shareholders to the system of governance is open to question, and also increases the management of accounting results.

-  Employee and management shareholders appear to be more vigilant and more effective. The latter make it possible to curb the management of the accounting result. Finally, no relationship between state ownership and the quality of the information produced by the company has been verified.