Institutional investment horizon, state ownership, and earnings management: evidence from China

ABSTRACT

This article examines the effect of the institutional investment horizon on firms’ earnings management and the moderating effect of state ownership. Using a sample of Chinese listed companies from 2010 to 2018, we find that a shorter institutional horizon leads to significantly more earnings management. Focusing on the interaction between the institutional horizon and state ownership, we find that the negative effect of short-term institutional shareholdings is weaker in state-owned firms. This article contributes to the existing literature by addressing the relationship between institutional investment horizon, state ownership, and earnings management in emerging capital markets.

KEYWORDS:

• Institutional shareholding
• institutional horizon
• earnings management
• state ownership
• emerging market

JEL CLASSIFICATION:

• C23
• G30
• M41

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by the Zhejiang Provincial Natural Science Foundation Youth Project [LQ19G020009,LQ20G020019];Zhejiang University of Technology Humanities and Social Sciences Research Fund