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International Journal of Law and Management: Auditor industry specialization and cost of equity on earnings management: the moderating role of institutional ownership
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Abstract
Purpose – This study aims to explore the moderating role of institutional ownership in the impact of
auditor industry specialization and the cost of equity on earnings management in Tehran Stock Exchange.
Design/methodology/approach – A total number of 198 firms were assessed in this study from 2014 to
2021. In this study, both accrual earning management (AEM) and real earnings management (REM) have
been included. The industry-adjusted earnings price ratio and Gordon Growth Model were used for the cost of
equity capital. In addition, auditor’s within-industry market share was used as a proxy for auditor industry
specialization.
Findings – The results showed that institutional ownership positively moderates the impact of auditor
industry specialization on AEM/REM. Furthermore, institutional ownership positively moderates the impact
of cost of equity on AEM/REM. Hypothesis testing based on a robust regression and t þ 1 test were also used
for the results.
Originality/value – Previous studies have reported mixed results of this empirical question whether
institutional ownership actually monitors managers and control earning management, considering the
auditor industry specialization and the cost of equity. To the best of authors’ knowledge, this is a pioneering
study to fill the existing gap. This study would not only benefit companies to manage financial and strategic
decisions more efficiently but also help national and international society apply effective mechanisms to
assist companies in decreasing earning management and increasing the firm performance, and try to push the
market into a favorable direction.
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INDONESIA
EMERALD INSIGHT
2023
ENGLAND
JURNAL ILMU HUKUM
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APA Citation
Arash Arianpoor. (2023).International Journal of Law and Management:
Auditor industry specialization
and cost of equity on earnings
management: the moderating role
of institutional ownership.(Electronic Thesis or Dissertation). Retrieved from https://localhost/etd