The Relationship between Managerial Ownership and Firm Performance Mediated by Real Earnings Management of Thai IPO Firms

Abstract

This study aims to examine the effect of managerial ownership on firm performance, both directly and through real earnings management as a mediating variable, during the pre- and post-initial public offering (IPO) years. Thai quoted companies on the Market for Alternative Investment (MAI) between 2012 and 2017 are analyzed. The findings reveal that before the IPO year, higher managerial ownership exhibits a positive association with firm performance, and this relationship is fully mediated by real earnings management. However, after the IPO, managerial ownership no longer significantly affects firm performance, and real earnings management acts as a mediating variable. These findings highlight the changes in ownership structure during the transition from private to public companies. The decline in managerial ownership post-IPO strongly suggests a potential loss of control and influence, which could impact strategic decisions, financial reporting practices, and operational efficiency. This research adds valuable and important insights to the previous studies on managerial ownership, earnings management practices, and firm performance, offering policymakers, investors, and market participants a better understanding of these dynamics. Nonetheless, it is critical to note that the study’s focus on the MAI in Thailand may limit the generalizability of the findings, so further research is strongly advised to be undertaken in diverse markets and contexts.