Abstract
This study examines how ownership structure (OS) affects the financial reporting quality (FRQ) of listed firms in India. It also investigates whether the interaction of firm-level governance (business group) and country-level governance (Companies Act, 2013) yields optimal outcomes. This study examines FRQ measured using accruals and real earnings management (AEM and REM). Higher earnings management lowers FRQ and vice-versa. Firms affiliated with business groups are likelier to choose real over accruals earnings management. They trade off accruals and real earnings management to expropriate minority shareholders. This pattern reverses after a change in regulation. Thus, stringent regulations may lower FRQ (suboptimal outcomes). High-promoter holding firms have lower accruals quality, while high-institutional holding firms use discretionary expenses to manage earnings.
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