THE EFFECT OF PYRAMIDAL STRUCTURES ON EARNINGS MANAGEMENT: EVIDENCE FROM ITALIAN LISTED COMPANIES

In recent years, business administration researchers and economic operators have become increasingly interested in ways to protect minority shareholders from opportunistic behaviour by the majority shareholders in control of company management. Scholars have further extended their attention to the systems of Corporate Governance after the failures and financial scandals involving some important international groups such as Enron (United States), Parmalat, and Giacomelli (Italy). These events have focused attention on the opportunistic use of technical discretion when drawing up financial information in the presence of incentives or subsidies linked to the expropriation of potential wealth generated through the Corporate Governance structure adopted by companies. Against this background of applying emphasis to the information included in financial statements as an important tool for the management of Corporate Governance conflicts, this paper intends to analyses the relationship between the practices of earnings management and the adoption of a pyramidal group structure within the Italian financial market. In particular, the contribution aims to prove whether earnings manipulation practices have been adopted with a higher frequency and a greater intensity within the listed pyramidal groups as well as whether any statistical relationships exist between the pyramidal structure and the earnings management phenomenon.