Ownership structure and the pricing of discretionary accruals in Japan

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Original languageEnglish
Pages (from-to)1-20
Journal / PublicationJournal of International Accounting, Auditing and Taxation
Issue number3
Publication statusPublished - 2004
Externally publishedYes


This paper examines the valuation effect of discretionary accruals for Japanese firms, taking into account the book value of equity. Consistent with US evidence, the Japanese market prices discretionary accruals, indicating that discretionary accruals enhance the value relevance of reported earnings. This value relevance is lower for cross-held firms, consistent with the view that cross-business shareholding aggravates tunneling or managerial opportunism through discretionary accounting choices. On the other hand, foreign shareholding and bond financing provide effective monitoring on managerial discretion of profit firms to enhance the valuation of discretionary accruals. © 2004 Elsevier Inc. All rights reserved.

Research Area(s)

  • Cross-business shareholding, Discretionary accruals, Foreign shareholding, Negative earnings