The Effect of Institutional Ownership on Earnings Management and its Reflection in Investment Decisions: Empirical Research on a Sample of Iraqi Banks
Keywords:
Institutional Ownership, Earnings Management, Investment DecisionsAbstract
The research aimed to measure the level of effect of institutional ownership and test the level of its effect on earnings management and the level of its effect on investment decisions in the environment of Iraq. For this aim to be achieved, the research used a quantitative method for the financial statements of a sample of Iraqi banks listed on the Iraqi Stock Exchange, which numbered (10) banks for the period (2012-2021). The independent variable (institutional ownership) was measured by using the percentage of shares owned by the company to the total number of shares, and the mediator variable (earnings management) was measured using (Kothari et al., 2005) model, while the dependent variable (investment decisions) was measured using on the indicator of earnings per share multiplier, known as the Price-to-Earnings Ratio (PER). The research concluded that there is a negative relationship between institutional ownership and earnings management, when the level of institutional ownership in banks (research sample) increases, this will be accompanied by a decrease in the level of earnings management in those banks. It is also noted that there is a negative correlation between earnings management and investment decisions, meaning that an increase in the earnings management level will be accompanied by a decrease in the level of rationalization of investment decisions in banks (research sample). The research also found that there is a positive relationship between the research variables, as the effect of institutional ownership in enhancing investment decisions increases when earnings management becomes a mediator.
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