EARNINGS MANAGEMENT AND INSTITUTIONAL INVESTORS PRESENCE IN BRAZILIAN FIRMS

Abstract

The research aimed to investigate whether the presence of institutional investors in ownership structure of the companies listed on the BM&FBovespa affects earnings management level disclosed in its financial statements. Additionally it examines whether such a relationship may have been impacted by the relevance of its stake in the firm. Earnings management is measured by metrics used in the study Earnings management and investor protection: an international comparison (2003). The hypothesis that the presence of this class of investors inhibits the practice of earnings management was tested by logistic regression. Institutional investors occurrence in ownership structure of researched sample - 344 firms listed on BM&FBovespa, in the period 2006 to 2010 – wasn’t significant with earnings management measures, leading to hypothesis rejection. Inference that institutional investors in Brazil does not seem to be informational efficient enough to segregate companies practicing earnings management is mandatory, accepting low information quality in accounting reports offered by firms in Brazilian market.