Does the Monitoring Mechanisms Considered as Dilemma against the Practices of Earnings Management

Abstract

This paper mainly aims to explore the role of monitoring mechanisms in limiting the earnings management practices among service firms in Jordan. The data used in this study were from the financial annual reports of 59 ASE listed service firms in 2015. The results of multiple regression analysis demonstrate the fairly varied influence of board of directors' variables. This paper presented three hypotheses covering board independency, CEO duality and audit committee. According to the results, internal monitoring mechanisms significantly impact the level of the practices of earnings management and the reduction of the agency conflict. Additionally, the regulatory bodies in Jordan should focus more on the role of internal monitoring mechanisms in Jordanian companies in terms of effectiveness in order to improve the quality of financial reports can be improved via the assurance of high quality of earnings. Finally, this study becomes a catalyst for more research on quality of financial reports and earnings quality in Jordan and other countries where there is still lack of studies in this domain.

Does the presence of independent directors reduce the practices of earnings management? The moderating role of family ownership concentration

“…In addition to the above, several studies conducted in the Jordanian environment have indicated that most Jordanian companies have practiced earnings management in their statements. The consequences of practices of earnings management are beyond doubt detrimental, decreasing the value of a company, its transactions, its image and its reputation, (Sraheen & Saleh, 2017;Ajeleh & Hamdan, 2009). These detrimental consequences are in addition to the fear of the collapse of large Þ rms as has happened in developed countries, as mentioned previously (Rodriguez-Ariza, Rodriguez-Ariza, Martínez-Ferrero, Martínez-Ferrero, Bermejo-Sánchez & Bermejo-Sánchez, 2016).…”