Articlehybrid2011

Corporate Governance and Earnings Management: Jordanian Evidence

Suzan Abed · Ali M. Al-Attar · Mishiel Said Suwaidan

153 citations0/0 files storedInternational Business Research

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Auditing, Earnings Management, Governance Corporate Finance and Governance Corporate Governance and Financial Management

Abstract

This study examines the relationship between earnings management and characteristics of corporate governance mechanism for a sample of Jordanian non-financial firms during the period 2006-2009. Earnings management is measured by discretionary accruals using Jones models. The characteristics examined are the existence of independence members within the board of directors, the size of the board of directors, the role duality (CEO/chairman), the percentage of insider ownership. In addition, two controlled variables have been employed in this study: size of the company and financial leverage. The results of this study reveal that the size of board of directors is the only variable that has a significant relation with earnings management. The findings of this study have important policy implications since they support encouraging applying corporate governance principles in order to control the behaviors of the board of directors which may lead to distortion in reported financial annual reports. As a result, the reliability and transparency of reported financial statements may be enhanced.

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References

1986Large Shareholders and Corporate Control 1996Higher market valuation of companies with a small board of directors 1997An Empirical Analysis of the Relation between the Board of Director Composition and Financial Statement Fraud 1996Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders 2003Earnings management and corporate governance: the role of the board and the audit committee 1995Managerial ownership, accounting choices, and informativeness of earnings 2005Board Monitoring and Earnings Management: Do Outside Directors Influence Abnormal Accruals?2000Discretionary-accruals models and audit qualifications

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2018The relationship between ownership structure and firm financial performance 2019The impact of corporate governance mechanisms on real and accrual earnings management practices: evidence from Jordan 2018The relationship between corporate governance and financial performance 2013Corporate Governance, Firm Size, and Earning Management: Evidence in Indonesia Stock Exchange 2014

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