لخّصلي

This study investigates the relationship between ownership structure and real earnings management (REM) in Malaysian firms. The findings, robust across various ownership measures (5%, 10%, 20%), REM measurements (combining different cost variables), and regression models (FGLS, OLS, PCSE, SCC), show that high levels of family (FAMOWN), institutional (INOWN), and foreign ownership (FOROWN) are significantly negatively associated with REM. This supports the efficient monitoring hypothesis and the knowledge spillover hypothesis. Conversely, managerial ownership (MANOWN) showed no significant relationship, potentially due to the lack of separation between management and ownership in many family firms. Control variables revealed that experienced audit committee members (ACEXP) and Big4 auditors (BIG4) reduce REM, while larger firm size (FSIZE), high leverage (LEV), and high sales growth (SGROW) increase it. Well-performing companies (high ROA) engage less in REM. The study concludes that ownership structure plays a crucial role in mitigating REM in Malaysia, offering implications for regulators, investors, and future research, which could explore government ownership and institutional ownership heterogeneity.

implies that institutional investors ’ presence acts as a monitor on firms’ use of REM activities, which is consistent with the efficient monitoring hypothesis (Pound, 1988). Therefore, H3 is supported. This may be because INOWN monitor their investments due to the huge wealth they contribute. This is in line with studies which conclude that INOWN constrain REM and improve FRQ (Sakaki et al., 2017). As for the coefficient of FOROWN, it is significantly negatively related to the level of REM, consistent with the prediction of H4. This result is also consistent with the knowledge spillover hypothesis, which predicts that foreign investors abreast of global investment experience and sophisticated skills are more likely to limit REM activities (Guo et al., 2015). Previous studies also found that companies with more sophisticated foreign investors have lower REM (Guo et al., 2015). In summary, Table 5 shows that Malaysian firms with family, institutional and foreign ownership are less likely to engage in REM.
Regarding control variables, the results in Table 5 show that the CG variables have a different impact on REM. For instance, ACEXP has a significant negative association with REM and suggesting that a high ratio of experienced directors on the audit committee have an effective role in lowering the level of REM. However, ACSIZ, ACME and ACGND have insignificant effects on REM. While ACIND is found to have a positive relationship with REM, suggesting that independent members do not restrict it. Audit quality (BIG4) is negatively related with REM, indicating that hiring Big4 audit firms (KPMG, Deloitte, PricewaterhouseCoopers [PwC] and Ernst and Young [EY]) brings more experience and is effective in reducing REM.
For the rest of the control variables, the results indicate that ROA has a negative and significant relationship with REM, suggesting that involvement is less likely for well- performing companies. The study also indicates that the relationship between FSIZE and REM is significantly positive, suggesting that bigger firms are better able to manipulate real earnings than smaller ones. Leverage (LEV) has a significant positive association with REM, suggesting that firms with high-level leverage practice apply more REM to avert a breach of debt agreements. The results also show a positive and significant association between SGROW and REM. The relationship between discretionary accruals (AEM) and REM is positive and significant, indicating that companies in the Malaysian market practise both types of EM.
6.2 Alternative REM measurements Alternative REM measures based on the argument that adding abnormal production costs to those of ACFO and ADISEXP results in duplication, as these figures are the result of the same activities (Cohen and Zarowin, 2010). Therefore, we measure REM by merging the three
6. Additional robustness tests 6.1 Alternative ownership measurements To confirm the result of the association between different types of ownership and REM, this study further examines the relationship by using different measurements for ownership (5%, 10 and 20%) to provide additional evidence that different forms of ownership have an influence on REM and therefore FRQ. FAMOWN, MANOWN, INOWN and FOROWN with a high percentage of share may control other parties, increasing their willingness to exploit the wealth of others by manipulation of earnings. The findings in Table 6 show that the coefficients for FAMOWN, INOWN and FOROWN are negative and statistically significant at 1%, which means that companies with high FAMOWN, INOWN and FOROWN at any percentage of ownership from 5% to 20% tend to practise less REM. This result supports the results of the main model reported in Table 5, suggesting that FAMOWN, INOWN and FOROWN have a possible role to play in restricting REM in Malaysia.
residuals into two measures: REM1 is the sum of ACFO and abnormal ADISEXP, and REM2 is the sum of ADISEXP and APROD (Cohen and Zarowin, 2010; Ghaleb et al., 2021b). Thus, we re-examined REM, REM1 and REM2 with different estimations from FGLS, ordinary least squares (OLS), panel-corrected standard errors (PCSE) and Driscoll–Kraay standard errors (SCC). The results for all models are reported in Table 7, based on three aggregate REM measurements. They show that the main variables of interest FAMOWN, INOWN and FOROWN are related negatively and significantly to REM measured by different aggregate measures, suggesting that the main results are robust.
6.3 Alternative regression estimation (OLS, PCSE and SCC) As previously explained (Section 3.4), our research models include both heteroscedasticity and autocorrelation problems. Although we ran FGLS to control the autocorrelation and heteroscedasticity coefficient estimates (Alonso et al., 2017; Ghaleb et al., 2021b; Wooldridge, 2010), we also used OLS with robust standard errors, PCSE and SCC to confirm the robustness of the main results. The results show that FAMOWN, INOWN and FOROWN have a significant negative association with REM, confirming the main results shown in Tables 5 and 7, and suggesting that in the Malaysian market, these have a potential role in curbing REM.
6.4 Endogeneity of ownership structure A common problem in accounting research is endogeneity, which arises as a result of simultaneous results, explaining variables and omitted variables. This study re-estimated the primary model using the lagged values of the IVs in order to address the potential problem of reversal causality (Al-Jaifi, 2017; AlQadasi and Abidin, 2018; Alzoubi, 2016). Table 8 shows the results of this re-estimation, indicating that it is unlikely that reverse causality would be important.
7. Conclusions
Over recent years, public knowledge of AEM and REM has increased substantially, and the quality of financial reporting has increased accordingly. Although researchers have paid much attention to AEM, REM is only now being highlighted as firms’ preference. The present role of OWS is to capitalize allocation amongst companies and to boost CG monitoring. This research addresses the issue of whether OWS mitigates REM practices in Malaysian firms, a country with highly concentrated ownership. Empirical evidence shows that OWS plays a vital role in shaping the governance of a company and significantly affects FRQ. Specifically, companies with a high level of FAMOWN, INOWN and FOROWN are very effective in monitoring management and limiting REM. However, the analysis does not provide evidence to support the hypothesis on the effect of MANOWN on REM. This may reflect a lack of separation of management and ownership between family firms. When companies have a significant amount of MANOWN, as found in many family-owned companies, it may not be necessary to waste resources to mitigate EM because management and ownership are not separate (Ali et al., 2007; Shayan-Nia et al., 2017). Our results are robust under various measures of OWS, REM and regression models.
The results of our paper have implications for regulatory bodies, investors and researchers for the composition of the OWS. The regulatory bodies may consider the significant role played by OWS in reducing the practice of profit management and seeking an appropriate model of OWS. Investors could learn more about the possible role of OWS in limiting REM, since it may protect their interests and wealth. The OWS as an effective form of internal governance monitoring should be taken into account by earnings-management researchers in limiting not only AEM but also REM. As in any research, this study has
limitations that may suggest future directions for research. First, the current research selected a limited number of variables related to CG, which may limit the generalizability of the results. Second, government ownership is an important issue that has not yet been examined. here. Researchers may also extend the classification of institutional ownership to include “dedicated” and “transient”, given the heterogeneity of institutional ownership in the Malaysian market.
Notes

1. Shleifer and Vishny (1997) argue that when “large owners gain nearly full control of the corporation,
   they prefer to generate private benefits of control that are not shared by minority shareholders”. Fan
   and Wong (2002) argue that “the nature of the agency problem shifts away from manager-
   shareholder conflicts to conflicts between the controlling owner and minority shareholders”.


2. In the absence of data on advertising and research and development expenditures, this is considered
   as zero (Cohen et al., 2008; Cohen and Zarowin, 2010; Roychowdhury, 2006).
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