The effect of CEO ownership on the information content of reported earnings

Aloke Ghosh, Doocheol Moon

Research output: Contribution to journalArticle

10 Citations (Scopus)


This paper examines the relation between capital market perceptions of earnings quality and CEO equity ownership. Using the earnings response coefficients (ERCs) from annual returns-earnings regressions as a proxy for investor perceptions of earnings quality, we find that ERCs first increase and then decline across higher levels of CEO ownership with an inflection point around 25% ownership. Using analyst behavior as another proxy for the perceptions of financial analysts, we find that earnings forecasts are more accurate as ownership increases, but once ownership levels reach about 25%, accuracy declines with further increases in ownership. Forecast dispersion, forecast revision volatility, and analyst following decline and then increase across increasing levels of CEO ownership. Our results suggest that, for low levels of CEO ownership, earnings are perceived as being more informative about future firm performance as ownership increases. However, once ownership levels are high, earnings are perceived as being less informative with further increases in ownership.

Original languageEnglish
Pages (from-to)393-410
Number of pages18
JournalReview of Quantitative Finance and Accounting
Issue number4
Publication statusPublished - 2010 Jan 1


All Science Journal Classification (ASJC) codes

  • Accounting
  • Business, Management and Accounting(all)
  • Finance

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