Non-executive employee ownership and financial reporting quality: evidence from Europe

Adwan, Sami, Alhaj-Ismail, Alaa and Jelic, Ranko (2022) Non-executive employee ownership and financial reporting quality: evidence from Europe. Review of Quantitative Finance and Accounting. ISSN 0924-865X

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This paper examines the association between non-executive employee shareholding and financial reporting quality. The analysis is conducted using a sample of non-financial firms listed in eleven European countries between 2006 and 2017. We find a positive association between non-executive employee ownership and financial reporting quality. Furthermore, we find this positive association to be more pronounced for firms operating in the following settings: higher labour union density, more industry peer firms and more flexible labour market regulations. Overall, these findings support the view that employee shareholding enhances the quality of financial reporting by aligning the interests of employees with those of shareholders through two channels: reduced agency problems and enhanced employee retention. Our study contributes to the research on the impact of ownership characteristics on financial reporting incentives. It underscores the role non-executive employee ownership can play in improving a firm’s corporate governance and therefore the quality of financial reporting.

Item Type: Article
Keywords: Financial Reporting Quality, Earnings Management, Employee Ownership, Rank and File Employees
Schools and Departments: University of Sussex Business School > Accounting and Finance
SWORD Depositor: Mx Elements Account
Depositing User: Mx Elements Account
Date Deposited: 21 Mar 2022 09:33
Last Modified: 16 May 2022 11:15

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