International Journal of Economy, Management and Social Sciences, 2(7) July 2013, Pages: 495-502

TI Journals

International Journal of Economy, Management and Social Sciences

ISSN
2306-7276

www.tijournals.com

Relationship of Institutional Ownership with Firm Value and

Earnings Quality: Evidence from Tehran Stock Exchange
Zobeideh Mokhtari *1, Khosro Faghani Makerani 2
1,2

Departments of Accounting, Branch Mazandaran, Islamic Azad University, Science & Research Branch, Mazandaran, Iran.

AR TIC LE INF O

AB STR AC T

Keywords:

Present research explores relationship of institutional ownership with firm valuation and earnings
quality on Tehran Stock Exchange (TSE). Institutional investors are regarded as one of the
effective governance mechanisms in financial markets. High power of this group of owners can
serve as a checking factor against opportunistic behaviors and earnings manipulation on the part of
managers and help increasing firm valuation. In the current study, from among the set of earning
quality indicators, earnings persistence and earnings predictability were chosen the relationship of
which with institutional ownership for a sample of 50 listed companies on TSE during 2009
through to 2011 was tested.

Institutional ownership
Earnings quality
Earnings persistence
Earnings predictability
Firm value

Research results indicate a significantly positive association between institutional ownership and
earnings quality (earnings persistence and predictability). However, between institutional
ownership and firm value no significant relationship is found.
2013 Int. j. econ. manag. soc. sci. All rights reserved for TI Journals.

1.

Introduction

Institutional ownership is a highly important effective external governance mechanism. This group of investors is in a position to influence
the adopted practices by firms and their presence can lead to a change in firm behaviors. This is because of the more effective surveillance
conducted by institutional investors [18]. Institutional owners are the institutes that trade in securities in high volumes. Banks, insurance
companies, investment funds (such as trust funds and mutual funds), and pension funds are among the institutional investors [4]. Research
results indicate institutional shareholders due to their high percentage of shareholding are in the position to exercise control on actions of
managers. Considering the power and motives of institutional investors in persuading managers to give high quality report of earning and in
providing them incentives for performance improvement, in this study the extent to which institutional owners might be of influence in firm
value and earnings quality is investigated.
Despite the relatively robust evidence on the relationship of firm value and insider shareholding, the connection between institutional
investors and firm value has still remained quite vague and unknown. Theoretically, institutions are likely to have incentives for active
supervision over management and subsequently for increase of share value [17], [14]. Bushes (1998) states supervision over firm by
institutional investors occurs implicitly by information gathering and pricing and explicitly by leading firm actions.
In recent years, the issue of reported earnings quality has drawn attention of many researchers. Financial statements and on top of it profit
and loss statement (figure of net profit) as the nucleus of financial reporting process are the main focus of investors. Low quality earnings
can lead to inefficient resource allocation and consequently inappropriate wealth transfer [16]. For years the gap between management and
ownership and the distrust to good performance of managers as representatives of owners, as suggested by the Agency Theory, has been a
major concern for accounting scholars, while in practice, firm operation cycle is primarily decided by managers. Principles of corporate
governance are introduced as a mechanism for mitigating agency problems. The elements of corporate governance improve earnings
quality by making sure that earnings are not artificially led in certain directions. In this study, from among the indicators of earnings
quality, Discretionary Accruals, Earnings Persistence, and Earnings Predictability are chosen as the independent variables and Firm Value
as the dependent variable.
Shareholders, especially institutional investors, play a crucial role in corporate governance system. Institutional investors are able to
monitor firm management and their influence in firm management can be utilized to align management interests with the shareholders for
maximization of shareholder wealth. Now, the question which is going to be answered in this study is whether there is any significant
relationship between firm value on the one side, and institutional ownership and earnings quality (i.e. earnings persistence and
predictability) of the listed companies on TSE on the other side?

* Corresponding author.
Email address: z_mokhtari1382@yahoo.com

Zobeideh Mokhtari and Khosro Faghani Makerani

496

Inter nat ional Journal of Economy, Mana ge ment and Social Scie nc es , 2(7) July 2013

2.

Research Background

Shleifer and Vishny (1986) argued that presence of large institutional investors because of their effective supervision will have positive
effect on firm value [17]. Jung and Kown (2002) investigated relationship of ownership structure with earnings quality in Korea. Their
findings indicated that simultaneously with an increase in presence of institutional investors, earnings information content increases as well
[9]. Rajgopal et al (2002) demonstrated that increase in institutional ownership reduces managers incentives for earnings manipulation and
enriches earnings information content [15]. Mashayekh and Esmaeeli (2006) in study of the relationship between earnings quality and some
aspects of corporate governance, including percentage of shareholding by the board members and number of staff managers in the listed
companies on the stock exchange, found no significant association between earnings quality and number of staff manager and percentage of
shareholding by the board members [10]. Velury and Jenkins (2006) examined supervisory role of institutional investors in earnings quality
and using a multivariate regression they measured the effect of variables ownership percentage of institutional investors, ownership
percentage of managers, firm size, and debt ratio on earnings quality. Their findings indicated a positive and significant association
between institutional owners and earnings quality and inverse effect of ownership concentration on earnings quality [18]. Navissi and
Naiker (2006), based on Pounds theories (1988) documented relationship of institutional ownership with firm value in New Zealand. Their
findings suggested strong incentives of institutional investors for supervision on firm management. Hence, their presence would positively
affect firm value, but at high ownership levels, institutional investors may persuade board of directors to adoption of sub-optimal
decisions[12]. Hosseini (2007) investigated the role of institutional shareholders as one of the instruments of corporate governance in
shareholder return. His findings indicated absence of any significant relationship between institutional shareholders and share return,
whereas the obtained results from researches in other countries suggested a positive or even negative association between the two variables
[8].
Bagaeva (2007), in study of whether high degree of owners control of company affairs will increase earnings quality, found that a better
earnings quality is associated to a higher control [2]. Hassas Yeganeh et al (2008) examined relationship of institutional investors with firm
value and found a generally positive relationship between institutional investors and firm value and no significant linear relationship
between ownership concentration and firm value [7]. Hashim and Devi (2008) in study of corporate governance, ownership structure and
earnings quality in Malaysia found positive and significant relationship of percentage of family members ownership and institutional
ownership with earnings quality but no significant association between independence of the board members and earnings quality [6].
Van den Brand (2009) documented the effect of corporate governance on earnings quality and concluded that elements of corporate
governance (either internal or external) have impact on earnings management and the results suggested that better corporate governance
goes along with increased reliability [3]. Nasrollahi and Arefmanesh (2010) by study of the relationship between ownership structure and
reported earnings quality by the listed companies on TSE found an incremental improvement in earnings quality (i.e. true, relevant and
timely information) along an increase in ratio of institutional ownership. On the other hand (excessive) concentration of institutional
ownership reduced earnings quality [11].

3.

Research hypotheses

To examine relationship of institutional ownership with earnings quality, a number of hypotheses are proposed which will be tested within
Irans environment:
Hypothesis 1: There is a significant relationship between degree of institutional ownership and earnings quality.
Hypothesis 2: There is a significant relationship between degree of institutional ownership and firm value.
Hypothesis 3: Earnings persistence is positively related to degree of institutional ownership.
Hypothesis 4: Earnings predictability is positively associated to degree of institutional ownership.

4.

Methodology

Current study is carried out through quantitative analysis of the obtained data from the financial statement, notes to financial statements and
reports on board activities to ordinary general meetings of the understudy firms available on the SEO website Research and Development
Information System of (www.rdis.ir) and by test of the correlation between the understudy variables using SPSS version 20.

5.

Statistical population and sampling

Statistical population in this research includes all the TSE listed companies. The understudy period concerns three consecutive years based
on financial statements 2009 through to 2011. Out of this population, 50 companies that met the following qualifications criteria were
selected as the research sample:
1.
2.
3.
4.

Considering the time period of access to information of 2009 to 2011, the firm must be admitted to the TSE before 2009 and until
21 March 2011 its name is not removed from the list of active companies on TSE;
During the mentioned financial years, the firm has not changed its line activity or fiscal year;
During the understudy years, the firm has not had a trading suspension longer than 3 months; and
During these years, the firm has not been loss making;

Relationship of Institutional Ownership with Firm Value and Earnings Quality: Evidence from Tehran Stock Exchange

497

Internat ional Jour nal of Economy, Mana ge ment and Social Sciences , 2(7) Jul y 2013

5.

6.

6.

It does not belong to banks and financial institutes (investment companies, financial brokerage, holdings, banks and leasing
companies), since these types of companies follow different procedures of financial disclosure and have different corporate
governance practices and structures.
To increase comparability, firm financial period ends on 21 March;

Dependent variables and their measurement

As was mentioned, earnings quality, earnings persistence, earnings predictability, and firm value are designated as the dependent variables.
6.1. Earnings Quality
earnings quality is an accounting term for which multiple definitions have been offered. Many researchers define earnings quality as
proximity degree of reported earnings to Hicksian Earnings (economic income) [16]. In other words the closer the accounting profit gets to
economic income the higher the quality of earnings becomes. Given the difficulty of earnings quality operational definition, researchers
profit from different criteria for measurement of this variable. In present research, it becomes operational by the following method.
6.1.1 Discretionary Accruals: these items are created when there is a difference between the time of capital flow and the time of auditing the

incomes and obtained profits. In this research, the modified model of Debrac Jeter (1999) which is derived from Jones Model will be
applied. This model comprises capital flow as the performance control which reduces errors arising from performance changes [5].
TAc i,t
TAs i,t-1

= 0 +1 *(

Salesi,t

TAs i,t-1

DA
QUALITYi,t = i,t =|

TAc i,t
TAsi,t-1

ARec i,t

)+ 2 *

TAs i,t-1

Tc i,t
TAs i,t-1

PPE i,t
TAs i,t-1

(6.1)

+ i,t

(6.2)

| i,t

TAci,t: Total of accruals, calculated as firm is income before extraordinary items and discontinued operation, minus cash flow from
continuing operations, plus extraordinary items and discontinued operation in year t ;

QUALITYi ,DA
t : The absolute discretionary accruals scaled by total assets.

TA ci,t
TAsi,t 1

: The predicted total accruals, from Equation (1);

TAsi,t-1 : Total Assets for firm i in year t 1;

Sales it: Change in net sales for firm i from year t-1 to t;
ARi,t: change in accounts receivable for firm i from year t-1 to t;
PPEi,t: Gross property, plant and equipment;
For examination of relationship between several independent variables and one dependent variable, the following regression model is
employed:
Model (1)

QDA= 0 + 1 INST + 2 CFO +3 LEV+ 4 SIZE +5 M2B

6.1.2 Earnings persistence: earnings persistence indicates probability on repetition and continuation of the earnings figure or the
components thereof in the future. Following researches of Ali et al (2007), earnings persistence measures aspects of return manifested in
income changes which can be conceived as beneficial aspects of the number of obtained earnings by investors on the market[1]. In current
study, the following model will be applied to evaluation of earnings persistence:
EPSi,t = 0 + 1 * EPSi,t -1 +i,t

(6.3)

QUALITYES = 1,i

(6.4)

QUALITYES: Is the earnings quality surrogated by earnings and persistence.

EPS: Is the earnings per share of a certain firm.
1: Persistence degree

Zobeideh Mokhtari and Khosro Faghani Makerani

498

Inter nat ional Journal of Economy, Mana ge ment and Social Scie nc es , 2(7) July 2013

Relationships of the independent variables with the dependent variable for the model of earnings persistence are defined based on the
following regression equation:
Model (2)

QES = 0 + 1 INST + 2 CFO +3 LEV+ 4 SIZE +5 M2B

6.1.3 Earnings predictability: earnings predictability as one of the qualitative features and times series of earnings represents current
earnings ability in short- and long term prediction of future earnings. Earnings prediction ability is a quality which increases forecasting
probability of past or present events. In this research, the following model will be applied to evaluation of earnings prediction power.
CFOi,t = 0 + 1*CFOi,t-1 + 2*AR i,t-1 + 3*INV i,t-1 +4*APi,t-1+5*DEPR ,t-1 +6*OTHER+i,

(6.5)

Other = Earn - (CFO + AR - AP + INV) DEPR

(6.6)

QUALITY i,t EP= i,t

(6.7)

CFOi,t: Firm is cash flow from operating activities at year t.

CFOi,t-1 : Firm is previous year cash flow from operating activities.
ARi,t-1: Changes in firm is previous year accounts receivable.
INVi,t-1 : Changes in firm is previous year inventory
APi,t-1: Changes in firm is previous year accounts payable.
DEPRi,t-1: Firm is previous year depreciation.
EARN: The earnings before extra items and discontinued operations.
OTHER: Net of other accruals.
QUALITYi,t EP: The residual of earnings predictability model, as metric of earnings quality.
Relationships of the independent variables with the dependent variable for the model of earnings prediction are defined based on the
following regression equation:
Model (3)

QEP = 0 + 1 INST + 2 CFO +3 LEV+ 4 SIZE +5 M2B

6.2. Firm value

Tobins Q ratio is used as the firm performance indicator. If the calculated Q ratio for the firm is greater than 1, there is a strong incentive
for investment, that is to say, valuable growth opportunities for the firm, since it is expressed as the firm market value to its replacement
value. Its decrease over time indicates reduction in firm value. The mentioned ratio is the quotient of asset market value to cost price of
their replacement. In this paper, the simplified formula of Q ratio expressed as follows is used (Pederson & Thomson, 1997):

Tobin' s Q

EMV BVD
BVA

In the above model, EMV represents equity market value, BVD debt book value, and BVA asset book value. For measurement of this
variable, the following regression equation is defined:
Model (4)

7.

Tobins Q = 0 + 1 INST

+ 2 CFO +3 LEV+ 4 SIZE +5 M2B

Independent variable and its measurement

As was mentioned, in this study, institutional ownership is considered as the independent variable and defined as: ratio (percentage) of firm
shares held by major investment institutions to total number of outstanding shares in hands of shareholders (INST). To specify ownership
percentage of institutional investors, the information on composition of shareholders is utilized.

8.

Control variables

The variables which are most likely to affect the relationship between corporate governance and earnings quality are the following four
variables which are used as control variables. The data regarding these variables are gathered from financial statements of the sample
companies and announcements of the SEO.
SIZE: natural logarithm of EMV
CFO: firm operational cash flow
M2B: market-to-book value of equity

Relationship of Institutional Ownership with Firm Value and Earnings Quality: Evidence from Tehran Stock Exchange

499

Internat ional Jour nal of Economy, Mana ge ment and Social Sciences , 2(7) Jul y 2013

LEV: ratio of total debt to total asset

Firm size (SIZE) represents firm value and affects its operation.
Market-to-book value (M2B) represents market expectations from earnings growth in the future.
Financial leverage (LEV) is equal to book value of total debt divided by book value of total asset.

9.

Findings

9.1 Test results for the first hypothesis

In the first hypothesis, a relationship between institutional ownership and earnings quality is assumed which is tested through the following
procedure.
Table 1. Results on test the first hypothesis (Earnings Quality)

Model (1): QDA = 0 + 1 INST + 2 CFO +3 LEV+ 4 SIZE +5 M2B

Type of test
F-statistic Sig.
Result
Analysis of variance
1.869
1.03 The proposed model lack of fit
Given the significance level of F in ANOVA (1.03), it can be inferred that at 95 percent confidence there is no fit model. Therefore, some
of the control variables ought to be removed from the model and the new model has to be reexamined.
Table 2. Results on retest of first hypothesis (Earnings Quality)

Model (1-1): QDA = 0 + 1 INST + 2 LEV+ 3 SIZE

Type of test
F-statistic Sig.
Result
Analysis of variance
3.102
0.029 The proposed model fit
The retest gives an F probability of .029, suggesting presence of a fit model at 95 percent confidence level. In this research, estimates of
coefficients are presented using partial (individual) t-statistics.
Table 3. Results of -coefficients estimate in Model (1)

Unstandardized Coefficients
Variables
-coefficient
STDEV
-1.184
.245
Constant Factor
-.539
.185
INST
.098
.137
LEV
.047
.040
SIZE
Durbin-Watson statistic = 1.937
Multi-correlation coefficient =.245

Standardized
-coefficient
-.239
.057
.095
R2 = .060
Adjusted R2 = .041

t-statistic
-4.836
-2.920
.715
1.167

Sig.
.000
.004
.476
.245

Considering the obtained F (-2.920), at Sig = .004, relationship between institutional ownership and earnings quality is confirmed. In
addition, the results do not confirm any significance association between earnings quality and the control variable SIZE (Sig = .245) and
between earnings quality and the control variable LEV (Sig = .476). And given the value of Durbin-Watson statistic (1.937), the
assumption on absence of auto-correlation between the errors is confirmed.
9.2 Test results for the second hypothesis
In the second hypothesis, a relationship between institutional ownership and firm value is assumed which is tested through the following
procedure.
The obtained results from test of the second hypothesis are presented in tables 4 and 5.
Table 4. Results on test of the second hypothesis

Model (2): Tobins Q = 0 + 1 INST + 2 CFO +3 LEV+ 4 SIZE +5 M2B

Type of test
F-statistic
Sig.
Result
Analysis of variance
82.229
0.000
The proposed model fit
Considering the value of probability (significance level) (.000) which is smaller than .05, the null hypothesis at 95 percent confidence level
is refuted, i.e. at 95% confidence there is a fit model. Estimate of -coefficients is presented using partial t-statistics.

Zobeideh Mokhtari and Khosro Faghani Makerani

500

Inter nat ional Journal of Economy, Mana ge ment and Social Scie nc es , 2(7) July 2013

Table 5. Results of -coefficients estimate in Model 2

Unstandardized Coefficients
-coefficient
STDEV
.663
.104
Constant Factor
.026
.077
INST
1.75E-008
.000
CFO
.201
.058
LEV
SIZE
-.008
.018
M2B
.306
.016
Durbin-Watson statistic = 1.932
Multi-correlation coefficient = .861
Variables

Standardized -coefficient

t-statistic

Sig.

.015
.110
.151
-.021
.872

6.410
.344
2.402
3.463
-.439
19.218

0.000
.731
.018
.001
.661
.000

R2 = .741
Adjusted R2 = .732

Given the obtained F-statistic (.344), at Sig = .731, the relationship between institutional ownership and firm value is not confirmed. In
addition, the results indicate association of earnings quality with control variables CFO (Sig = .018), LEV (Sig = .001) and M2B (Sig =
.000), but no association between earnings quality and the control variable SIZE (sig = .661). The value of Durbin-Watson statistic (1.932)
confirms the assumption on absence of auto-correlation between the errors.
9.3 Test results for the third hypothesis
The third hypothesis suggests an association between institutional ownership and earnings persistence which is examined through the
following procedures. The results on test of the third hypothesis are provided in tables 6 to 9.
Table 6. Results on test of the third hypothesis

Model (3)QES = 0 + 1 INST + 2 CFO+3 LEV+ 4 SIZE+ 5 M2B

Type of test
F-statistic
Sig.
Result
Analysis of variance
1.192
0.316 The proposed model fit
According to the obtained results from ANOVA which examines model fit, the value of F probability (significance level) (0.316) indicates
absence of a fitting model at 95 percent confidence level. Therefore, some of the control variables have to be removed from the model and
the new model will be reexamined.
Table 7. Results on retest of the third hypothesis

Model (3-1): QES = 0 + 1 INST + 2 SIZE + 3 M2B

Type of test
F-statistic Sig.
Result
Analysis of variance
1.975
0.120 The proposed model fit
The results show even by exclusion of the two control variables CFO and LEV, value of F probability (significance level) (0.120) is still
greater than 0.05, suggesting absence of a fitting model at 95% confidence level. Hence, the two remaining control variables are removed
from the model and the model is retested without presence of any control variable.
Table 8: Results on retest of the third hypothesis

Model (3-2): QES = 0 + 1 INST

Type of test
F-statistic Sig.
Result
Analysis of variance
4.861
0.029 The proposed model fit
Value of F probability (significance level) (0.029) indicates the model fit at 95 percent confidence level. Estimate of -coefficients are
presented using partial t-statistics.
Table 9: Results of -coefficients estimate in Model (3)

Unstandardized Coefficients
Variables
-coefficient
STDEV
.563
.087
Constant Factor
.373
.169
INST
Durbin-Watson statistic =1.777
Multi-correlation coefficient =.178

Standardized -coefficient

t-statistic

Sig.

.178

6.442
2.205

.000
.029

R 2 =.032
Adjusted R2 = .025

Relationship of Institutional Ownership with Firm Value and Earnings Quality: Evidence from Tehran Stock Exchange

501

Internat ional Jour nal of Economy, Mana ge ment and Social Sciences , 2(7) Jul y 2013

Considering the obtained F-statistic (2.205) at Sig = .029, the assumed relationship between institutional ownership and earnings
persistence is confirmed. In addition, the results do not confirm association of earnings quality with control variables CFO, LEV, M2B and
SIZE. Durbin-Watson statistic (1.777) indicates absence of auto-correlation between the errors.
9.4 Test results for the fourth hypothesis
The obtained results from test of the fourth hypothesis which suggests an association between institutional ownership and earnings
predictability are provided in tables 10 and 11.
Table 10: Results on test of the fourth hypothesis

Model (4): QEP = 0 + 1 INST + 2 CFO+3 LEV+ 4 SIZE+ 5 M2B

Type of test
F-statistic
Sig.
Result
Analysis of variance
7.885
0.000 The proposed model fit
Considering the obtained F probability (significance level) (.000) from ANOVA, which is smaller than .05, the null hypothesis at 95%
confidence level is rejected, implying presence of fit model at the mentioned confidence level. Estimate of -coefficients is presented using
partial t-statistics.
Table 11: Results of -coefficients estimate in Model (4)

Unstandardized Coefficients
-coefficient
STDEV
4.357
.340
Constant Factor
.517
.252
INST
8.02E-008
.000
CFO
-.207
.191
LEV
.127
.060
SIZE
-.151
.052
M2B
Durbin-Watson statistic = 1.942
Multi-correlation coefficient = .464
Variables

Standardized -coefficient

t-statistic

Sig.

.156
.267
-.082
.176
-.228

12.806
2.046
3.350
-1.083
2.096
-2.282

.000
.043
.001
.281
.038
.005

R 2 = .215
Adjusted R2 = .188

Given the obtained F-statistic (2.046) at Sig = .043, the relationship between institutional ownership and earnings predictability is
confirmed. In addition, the results confirm relationship of earnings quality with control variables CFO (Sig =.001), SIZE (Sig = .038) and
M2B (Sig = .005), but no relationship between earning quality and the control variable LEV (Sig = .281). Given the value of DurbinWatson statistic (1.942), absence of auto-correlation between the errors is confirmed.

10. Conclusion
In test of the first hypothesis, the obtained results confirmed the assumed association between institutional ownership and earnings quality,
and given this result, it can be inferred that since institutional owners have access to confidential information of firms, in share pricing they
rely on historical information, and by persuading managers to timely and accurate reporting, they eventually contribute to improvement of
financial reporting including earning quality. This result is consistent with findings of Nasrollahi and Arefmanesh (2010), Van den Brand
(2009), Hashim and Devi (2008), Bagaeva (2007), Velury and Jenkins (2006), Jung and Kown (2002), and Rajgopal et al (2002), and
inconsistent with findings of Mashayekh and Esmaeeli (2006).
The test results of the second hypothesis do not confirm a significant relationship between institutional ownership and firm value, while the
prior research reports a positive or even negative relationship between the two variables. This could be attributed to the small sample size in
this study. This result is consistent with findings of Hosseini (2007), and inconsistent with findings of Hassas Yehaneh et al (2008), Navissi
and Naiker (2006), and Shleifer and Vishny (1986).
The obtained results from test of the third hypothesis confirm a positive relationship between institutional owners and earning persistence,
so as the higher the institutional ownership becomes, the more persistent the earnings turn out to be. The earnings not achieved from
unforeseen items are more persistent. For financial analysts and investors the figure of accounting profit alone is not of interest as the sole
indicator of future cash flows, but persistence and repeatability of the reported earnings is very important. This finding is consistent with
results of Van den Brand (2009).
Finally, the test results affirm the positive relationship between institutional ownership and earnings predictability supposed by the fourth
hypothesis. This can help prediction of future earnings, so as investors can use the obtained earnings for evaluation of profitability and
investment in the business unit. Institutional owners consider earnings predictability as a measure for estimation of share market price and a

Zobeideh Mokhtari and Khosro Faghani Makerani

502

Inter nat ional Journal of Economy, Mana ge ment and Social Scie nc es , 2(7) July 2013

crucial factor for prediction of earnings distribution. Hence, the expected earnings play a key role in firm or equity valuation and earnings
predictability will give prospective investors more incentive. This result is inconsistent with findings of Van den Brand (2009), as he did
not find any significant relationship between constituents of corporate governance, including institutional ownership, and earnings
predictability.
In sum, according to the research results, institutional shareholders play a major role in improvement of financial reporting which can be
attributed to the supervisory role of this group of investors and professional practices adopted by them. It is suggested the issued laws and
regulations in addition to emphasis on the supervisory role of institutional shareholders to consider some room for protection and voice of
minority shareholders. In addition, portfolio analysts and market participants in decision making are expected to pay more attention to the
relationship between constituents of corporate governance in the stock exchange. Further, the stock exchange is recommended to provide
periodical reports on firms ratings in terms of corporate governance and earnings quality.

References
[1]
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18]

Ali, A.,Chen, T.Y., and Radhakrishnan, S.(2007). Corporate disclosures by Family firms. Journal of Accounting and Economics,44(1-2):238-286.
Conference Issue on corporate Governance: Financial Reporting, Internal Control, and Auditing.
Bagaeva, A. (2007). '' Owner,s control, instutional environment and earnings quality In Russia.'' Department of accounting and finance university of
Oula.http://www.ssrn.com
Bob Van den Brand, Corporate Governance & Earning Quality (2009). SSRN eLibrary.
Bushee, B. J (1998). '' The Influence of Institionsl Investors on Myopic R&D Investment Behavior '', Accounting Review, Review, 73(July): 305334.
Debra C.jeter, L .S. (1999) Cross - sectional estimation of abnormal accruals using quarterly and annual data: Effectiveness in detecting
event-specific earnings management . accounting and business research
Hafiz AishahHashim&S.Susela Devi.(2008), '' Corporate Governance, Ownership Structure and Earnings Quality: Malaysian Evidence '' working
paper
Hassas Yeganeh, Yahya, Moradi, Mohammad, and Eskandar, Hadi (2008), Study of Relationship between Institutional Investors and Firm Value,
Accounting and Audit Studies, No.52, p.107
Hosseini, Mojtaba (2007), Impact of Institutional Shareholders as a Corporate Governance Mechanism on Firm Share Return; Evidence from
Tehran Stock Exchange, School of Management, University of Tehran
Jung, K and Kown, S. Y. (2002). "Ownership structure and earnings informativeness: Evidence from korea."the international journal of
accounting, Vol. 37,No. 3,PP. 301-325.
Mashayekh, Shanaz and Esmaeeli Maryam (2006), Impact of Corporate Governance on Firm Income Smoothing; Evidence from Tehran Stock
Exchange, yr.2, No.7, pp. 31-54
Nasrollahi, Zahra and Arefmanesh, Zohreh (2010), Study of Relationship between Ownership and Earnings Quality; Evidence from Tehran Stock
Exchange, Accounting Knowledge, yr.1, No.3, pp.117-138
Navissi, Farshid and Naiker, Vic (2006). '' Institunal Ownership and Corporate value'', Managerial Finance, Vol.32 no.3, 2006 pp. 247-256
Pedersen, T & Thomsen, .(1997). European of Corporate Ownership a twelve-country study. Journal of International Business Studies, 28,759 778
Pound, J. (1988), '' Proxy contests and the efficiency of shareholder
oversight '', Journal of Financial Economics, Vol. 20, pp. 237-65.
Rajgopal S, Venkatachalam M, Jiambalvo J. (2002 ). Is institutional ownership associated with earnings management and the extent to
which stock prices reflect future earnings? Working paper , Stanford U niversity
Schipper, K. and Vincent, L. (2003). Earnings quality.Accounting Horizons, Vol. 17(supplement) pp. 97-110.
Shleifer, A. and Vishny, R. (1986), '' Large shareholders and corporate control '', Journal of Political Economy, Vol. 94,pp. 461-88.
Velury, U.and Jenkins, D. S. (2006)."Instituional ownership and the quality of earnings.'' Journal of Business Research, Vol. 59 No. 9,pp 1043-105.