This study examines the effect of ownership structure on the quality of financial reporting. It examines ownership concentration and individual investors both foreign and local. Ownership concentration endogeneity, company age, a log of total sales and industry affiliation are controlled for in the models. Data were collected from 68 annual reports of companies listed on the Amman Stock Exchange for a sample period from 2005 to 2015. The Hausman test of ownership concentration endogeneity was performed for both models. The results from the first model show that ownership concentration has no effect on the quality of financial reporting. While, individual foreign ownership, company age, a log of total sales and industry affiliation have a positive significant effect on quality of financial reporting. Also, the second model showed a consistent result of the ownership concentration effect on quality of financial reporting. While, individual local ownership, company age, a log of total sales and industry affiliation have a positive significant effect on the quality of financial reporting. The results support the agency theory in the Jordanian context that higher ownership concentration reduces the quality of financial reporting. Moreover, the study adds to the limited literature in Jordan that highlights the endogeneity problem of ownership concentration. The results are useful to policymakers and shareholders to improve the quality of financial reporting in the Jordanian market.
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In-Text Citation: (Alsmady, 2018)
To Cite this Article: Alsmady, A. A. (2018). Ownership Structure and its Endogeneity Effect on the Quality of Financial Reporting. International Journal of Academic Research in Business and Social Sciences, 8(3), 527–542.
Copyright: © 2018 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
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