Employee stock ownership and earnings management: evidence from France
by Riadh Garfatta
International Journal of Management Practice (IJMP), Vol. 16, No. 2, 2023

Abstract: Although the relationship between employee stock ownership (ESO) and earnings management has a theoretical basis, it has hardly been the subject of empirical validation. This study attempts to investigate the nature of the relationship between ESO and earnings management practices. It is carried out on the sample of 136 French CAC All-Tradable index companies observed from 2015 to 2019. The system generalised method of moments (GMM) estimator is used in the dynamic panel and the results estimated from the system GMM model show no significant correlation at ESO levels below 3%, the threshold at which the relationship becomes positive. We also note that earnings management is upwards. A priori, ESO at significant levels appears interesting for the manager and encourages him to be in coalition with employee owners to develop his opportunistic behaviour and therefore the earnings management practices. This entrenchment hypothesis is consistent with the conclusion of Gharbi and Lepers (2008) stating that significant employee ownership favours CEO entrenchment. These findings are with strong economic implications. It is very important for investors to know that companies with significant ESOs tend to manage their earnings upwards.

Online publication date: Wed, 01-Mar-2023

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Management Practice (IJMP):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com