The Role of Foreign Shareholders in Disciplining Financial Reporting

35 Pages Posted: 5 May 2017

See all articles by Christof Beuselinck

Christof Beuselinck

Catholic University of Lille - IESEG School of Management

Belen Blanco

The University of Adelaide

Juan M. García Lara

Universidad Carlos III de Madrid - Department of Business Administration

Multiple version iconThere are 2 versions of this paper

Date Written: May/June 2017

Abstract

We investigate the role of foreign shareholders in improving the quality of accounting information provided by firms domiciled in countries with low de facto institutional quality. Using a sample of firms from four South European countries (Greece, Italy, Portugal and Spain) for which we observe detailed ownership evolutions over the period 2002–2007, we find that increases in foreign ownership lead to increases in financial reporting quality but only if the foreign shareholders are domiciled in countries with strong investor protection mechanisms. Further, we find that the improvement in financial reporting quality is more pronounced in the case of foreign institutional investors. Finally, our results hold before and after the introduction of the International Financial Reporting Standards (IFRS) in 2005.

Keywords: earnings quality, foreign investors, institutional investors, ownership structure

Suggested Citation

Beuselinck, Christof and Blanco, Belen and García Lara, Juan Manuel, The Role of Foreign Shareholders in Disciplining Financial Reporting (May/June 2017). Journal of Business Finance & Accounting, Vol. 44, Issue 5-6, pp. 558-592, 2017, Available at SSRN: https://ssrn.com/abstract=2962701 or http://dx.doi.org/10.1111/jbfa.12239

Christof Beuselinck (Contact Author)

Catholic University of Lille - IESEG School of Management ( email )

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Office: A321
Puteaux, 92800
France
+33320545892 (Phone)

Belen Blanco

The University of Adelaide ( email )

10 Pulteney Street
Adelaide, South Australia 5005
Australia

Juan Manuel García Lara

Universidad Carlos III de Madrid - Department of Business Administration ( email )

Calle Madrid 126
Getafe, Madrid, Madrid 28903
Spain

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