Ownership Structure And Income Accounting Strategy In Palestine

This study examines the validity of Positive Accounting Theory approach-bonus plan,debt covenant and political cost hypotheses-as well as examines the impact of ownership structure components-ownership concentration,institutional ownership,foreign ownership and government ownership-to explain the income accounting strategy choice of Palestinian non-financial listed companies.This study adopts a comprehensive measurement of the income strategy.Furthermore,it uses Ordered Probit,Ordered Logit and Ordinary Least Squares techniques,using pooled cross-sectional data for time window 2011 to 2016 covering 169 observations of Palestinian non-financial listed companies that represent 85 percent of non-financial listed companies.The results show that the PAT is,to a high extent,valid within Palestine context;in fact,the bonus plan and debt covenant hypotheses are found positively and significantly explaining management' adoption of income increasing accounting strategy.However,the political cost hypothesis is found invalid within Palestine context due to its different institutional settings.Importantly,it is found that the ownership structure explains management's choice of income accounting strategy;in fact,income increasing accounting strategy is negatively associated with ownership concentration,foreign ownership and government ownership level yet positively associated with institutional ownership level.Suggesting that within Palestine context,ownership concentration,foreign ownership and government ownership mitigates agency conflicts regarding income accounting strategy choice,while the institutional investors contribute to agency conflict regarding income accounting strategy choice.Moreover,the findings of the thesis are robustness using various modelling specifications,using various techniques of analysis and using various time windows,The study makes several contributions.First,it produces evidence regarding the validity of PAT in Palestine a context that is characterized by high concentrated ownership.Second,this is the first study to produces evidence of the impact of ownership structure components on the choice of income accounting strategy.Finally,in light of international accounting convergence and best governance practices,the findings have policy implications for International Accounting Standards Board,companies' shareholders,investors,management,auditors,academics and Palestinian government and accounting regulators so as to reach an optimal corporate ownership structure that leads to save shareholders' interests and promote investor protection,hence enhance public trust in accounting practices as well as help to improve stock markets.