Blockholder Characteristics and Earnings Quality

Abstract

This study focuses on the impact of blockholder characteristics on earnings quality. Most of the studies in literature make the implicit assumption that blockholders are a homogeneous group. This study is one of few studies that acknowledges the heterogeneity of blockholders and attempts to understand the unexplained proportion of blockholder heterogeneity. Earnings quality is calculated using the modified Dechow and Dichev (2002) model with fixed effects (FDD model) by Lee and Masulis (2009), and it is regressed on various blockholder characteristics. The results show that earnings quality is lower for firms with market-driven and multilateral blockholders.