Real Earnings Management and Corporate Governance: A Study for Latin America

Mellado, Cristhian; Saona, Paolo

doi:10.2139/ssrn.3222094

Cited by 4 publications

(4 citation statements)

References 31 publications

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“…However, the results for rule of law showed that in both China and India, as the morale of people in rules increases, and they have more positive perceptions towards the enforcement of property rights and contract, AEM is constrained. Similar results were found by Mellado and Saona (2020) in their study on REM.…”

Section: Resultssupporting

confidence: 90%

“…Similarly, in Australia, 50% has been documented as the average percentage of independent boards (Christensen et al , 2010). Most of the existing literature on CG mainly emerged from American or European firms (Mellado and Saona, 2020; El Diri et al , 2020); however, emerging economies such as China and India have been largely ignored. Against this backdrop, the study aims to explore the role of CG in influencing the two most commonly used methods of EM in these two emerging economies.…”

Section: Introductionmentioning

confidence: 99%

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Role of corporate governance in constraining earnings management practices: a study of select Indian and Chinese firms

Pandey

Pattanayak

Singh

2021

JIBR

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Purpose The purpose of this paper is to investigate the effect of corporate governance on both accrual-based and real earnings management practices in select firms of the two world's largest economies, i.e. India and China. Design/methodology/approach The study has implemented a feasible generalized least square regression (FGLS) method to analyse the effect of corporate governance on accrual-based and real earnings management. Findings The study exhibits the significant contribution of large board sizes and independent boards in constraining the use of both accruals as well as real earnings management practices. However, audit quality had an impact on accrual earnings management only. The study also documents that accrual earnings management practices are controlled when the government’s potential to develop and enactment of policies increases. Practical implications The findings of the study provide insights to analysts, prospective investors and regulators to evaluate the effectiveness of the board in a new issue firm and help the firm to enhance its corporate governance policies. Originality/value Unlike previous studies who mostly examined the impact of corporate governance factors on accrual earnings management, the present study has, first, considered both accruals as well as real earnings management. Second, the present study has used the unique sample of new issue firms listed on the Indian and Chinese stock market, and third, the study did an additional analysis to examine the impact of country-level governance factors on accrual earnings management.

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Section: Resultssupporting

confidence: 90%

Section: Introductionmentioning

confidence: 99%

Role of corporate governance in constraining earnings management practices: a study of select Indian and Chinese firms

Pandey

Pattanayak

Singh

2021

JIBR

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“…The expenses are considered as nil if not reported in the annual reports (Shayan-Nia, et al, 2017). Following (Cohen & Zarowin 2010; Shayan-Nia et al, 2017; Mellado & Saona, 2018; Zang, 2012). We multiply ABDISEXP with -1 so that higher value represents higher REM.…”

Section: Methodsmentioning

confidence: 99%

Potential Substitution Between Accrual Earnings Management and Real Earnings Management Among Pakistani Listed Firms

Shah

Rashid

Malik

2020

Global Business Review

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This article empirically explores the association between accrual earnings management (AEM) and real earnings management (REM) using a sample of 150 non-financial listed firms for the period 2008–2017. The AEM is measured through the original Jones model (1991) and Dechow et al. (1995) model, whereas REM is measured through Roychowdhury’s (2006) model. For empirical analysis, the study estimates simultaneous equations by using ordinary least square (OLS) and the two-stage least square techniques (2SLS). The result of the analysis indicates that there is a negative and significant relationship between AEM and REM, suggesting that Pakistani listed firms employ AEM and REM as a substitute to achieve earnings targets. The results of the study are valuable for auditors and regulators to contemplate, govern and legalize suitable guidelines to enhance the transparency in the financial reporting quality.

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“…We multiply ABDISEXP by -1 so that higher value represents higher real earnings management. Following (Zang 2012;Cohen &Zarowin 2010;Shayan-Nia et al 2017;Mellado & Saona 2018).…”

Section: Roychowdhury Model (2006)mentioning

confidence: 99%

Does Ownership Structure Improve Financial Reporting Quality? Evidence of Real Earnings Manipulation among Pakistani Firms

Shah

Rashid

Malik

et al. 2020

AJAG

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This paper examines whether ownership structure improve the financial reporting quality. We built on two different econometric techniques including Feasible Generalized Least Square (FGLS) and Panel Corrected Standard error Model (PCSE) by using a sample of 150 non-financial firms listed on Pakistan Stock exchange for the period of 2008-2017. The results propose that institutional ownership and as well as managerial ownership are negatively related to real earnings manipulation, which implies that both these types of ownership structure act as a best monitoring mechanism in reducing real earnings manipulation and thus enhancing the financial reporting quality. Whereas, state ownership and family ownership are positively associated to real earnings manipulation, which suggest that family and state ownerships engage in real earnings manipulation and thus reducing the financial reporting quality. Overall results supports the alignment hypothesis, entrenchment effect and efficient monitoring hypothesis of the agency theory. The results of the study provide practical implication for investors and policymakers in understanding the role of ownership on financial reporting quality.

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Real Earnings Management and Corporate Governance: A Study for Latin America

Cited by 4 publications

References 31 publications

Role of corporate governance in constraining earnings management practices: a study of select Indian and Chinese firms

Role of corporate governance in constraining earnings management practices: a study of select Indian and Chinese firms

Potential Substitution Between Accrual Earnings Management and Real Earnings Management Among Pakistani Listed Firms

Does Ownership Structure Improve Financial Reporting Quality? Evidence of Real Earnings Manipulation among Pakistani Firms

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