Non‑executive employee ownership and financial reporting quality: evidence from Europe

Sami Adwan, Alaa Alhaj Ismail, Ranko Jelic

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)
113 Downloads (Pure)


This paper examines the association between non-executive employee shareholding and financial reporting quality. The analysis is conducted using a sample of non-financial firms listed in eleven European countries between 2006 and 2017. We find a positive association between non-executive employee ownership and financial reporting quality. Furthermore, we find this positive association to be more pronounced for firms operating in the following settings: higher labour union density, more industry peer firms and more flexible labour market regulations. Overall, these findings support the view that employee shareholding enhances the quality of financial reporting by aligning the interests of employees with those of shareholders through two channels: reduced agency problems and enhanced employee retention. Our study contributes to the research on the impact of ownership characteristics on financial reporting incentives. It underscores the role non-executive employee ownership can play in improving a firm’s corporate governance and therefore the quality of financial reporting.

Original languageEnglish
Pages (from-to)793-823
Number of pages31
JournalReview of Quantitative Finance and Accounting
Issue number2
Early online date13 Apr 2022
Publication statusPublished - 22 Apr 2022

Bibliographical note

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  • Financial reporting quality
  • Rank and fle employees
  • · Earnings management ·
  • Employee ownership

ASJC Scopus subject areas

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


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