The Effect Of Ownership Concentration To Earning Quality = Pengaruh Konsentrasi Kepemilikan Terhadap Kualitas Laba

Stocks ownership in Indonesian public corporations is found to be highly concentrated. Indonesian corporations themselves were formerly family-owned business that then entered the capital market. Since the legal protec-tion of property rights by the state is still low, those family try to make sure that their assets are secure after entering the capital market by only emitted a small portion of stocks to the outside shareholders and maintain a larger portion on their hands. Considering the high ownership concentration in public corporations and Indonesian cultures that show high tendencies of collectivism, power distance, uncertainty avoidance, and secrecy, then the accounting information quality released by those companies is an empirical question that needs to be answered. Using panel data of 370 observations taken from 37 samples from 1992 to 2001, the result shows that market reacts negatively to earnings informa-tion released by concentrated companies. This result conforms to the en-trenchment effect and gives evidence how minority owners react to earnings information released by majority owners. Besides using pooled cross-sectional regression method, this study also uses firm specific regression method. The results show that firm specific regressions are higher than pooled regression coefficients on periods before and on the announcement date. Keywords: ownership concentration, earnings quality, firm specific coefficient