A brief survey of the impact of block holders on earnings

ABSTRACT This study surveyed and attempted to reconcile the differences between prior studies on block holders (large shareholders) and their effect on firm value through earnings management. The study was motivated by the lack of consensus as to whether block holders have a positive or negative influence on firm value. Block holders will have a lot to lose (gain) when firms collapse (prosper) through earnings management. Shareholders also have a part to play in earnings management. Shareholders reward firms that are quality or have potential while they tend to discount non-quality firms. Investors tended to vote with their feet. The larger shareholders however were more sophisticated and had the ability to discount firms and vice versa depending on the information. This study finds that there is more room for further research on block holders and earning management to support or refute the conflicting findings