The effects of board characteristics on earnings management

Kao, Lanfeng; Chen, Anlin

doi:10.22495/cocv1i3p9

Cited by 103 publications

(80 citation statements)

References 25 publications

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“…We arrive at various results, some of which confirm existing empirical work done by fellow researchers, in addition to some new results that shed new light on the complex CG relationship with performance. We have found that board size is positively linked with a high TQ ratio, which aligns with previous findings (Dalton et al, 1999;Kao and Chen, 2004;Lipton and Lorsch, 1992;Rahman and Ali, 2006). The size of the board was measured by the number of directors in it.…”

Section: Discussionsupporting

confidence: 92%

“…Board size is recognized as linked with the performance of firms, yet the existing evidence has produced mixed results, with some studies supporting large boards and others advocating smaller boards. Kao and Chen (2004) have found that a larger board size has the potential to weaken its functioning, and hence its performance, because large boards may be characterized by difficulties in achieving efficient communication between members. Yermack (1996) studied and analysed the governance and financial data of 452 large US firms between 1984 and 1991 and reported an inverse relationship between board size and firms' TQ value.…”

Section: Board Size and Performancementioning

confidence: 99%

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Corporate Governance and Tobin's Q as a Measure of Organizational Performance

Singh

Tabassum

Darwish

et al. 2017

British J of Management

224

153

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This empirical study examines the relationship between corporate governance and organizational performance (OP), measured using Tobin's Q (TQ) in the context of an emerging economy for which, as yet, only a handful of studies have been conducted. We employ a system generalized method of moments approach controlling for endogeneity and test it on a newly created dataset comprising 324 listed firms in Pakistan. We find that board size, number of board committees and ownership concentration are positively linked with high TQ ratio, whilst board independence and CEO duality display a negative relationship. In terms of moderating effects, we find that ownership concentration negatively moderates the relationship between board independence and OP, as well as that of CEO duality and OP. The relationship between the number of board committees and OP is positively moderated by ownership concentration. Our findings contribute towards a better articulation and application of a more concrete measure of OP − that of the TQ ratio − whilst, at the same time, testing the board composition-performance relationship in the context of an upcoming and increasingly important emerging market. Wider applicability of results and policy implications are discussed.

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Section: Discussionsupporting

confidence: 92%

Section: Board Size and Performancementioning

confidence: 99%

Corporate Governance and Tobin's Q as a Measure of Organizational Performance

Singh

Tabassum

Darwish

et al. 2017

British J of Management

224

153

View full text Add to dashboard Cite

show abstract

“…The result of this study supports the results of Kao and Chen 2004;Davidson et al 2005 andJaggi et al 2007). …”

Section: Asian Journal Of Finance and Accountingsupporting

confidence: 91%

Does Ownership Structure Affect Jordanian Companies’ Tendency to Practice Earnings Management?

Ramadan

2016

AJFA

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The aim of this paper is to examine the effect of ownership structure on a firm's ability to practice earnings management. To achieve this goal all 77th Jordanian industrial companies listed at Amman Stock Exchange (ASE) for the period 2000-2014 were selected resulting in 1089 firm-year observations. The empirical results suggest that the earnings management practices of Jordanian industrial companies listed at ASE are influenced by the ownership structure. Precisely, the result shows that equity concentration, management ownership and institutional investor equity are associated inversely with the practices of earnings management. Our results are consistent with the Alignment of Interest Hypothesis and the Efficient Monitoring Hypothesis which suggest that large shareholders have less motivation to manipulate earnings, and can reduce the scope of managerial opportunism.

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“…Therefore, boards with more independent outside directors are in a better position to increase monitoring and controlling the opportunistic behavior of managers (Jensen and Meckling, 1976). Several previous studies have argued that independent board constitutes a constraint on earnings management (Jouber and Kao and Chen (2004) and Ebrahim (2007) find that larger boards are associated with lower levels of discretionary accruals. We have not predicted the sign of this association.…”

Section: Effect Of the Board Characteristics On Earnings Managementmentioning

confidence: 97%

The effect of the mandatory adoption of IAS/IFRS on earnings management: Empirical evidence from South Africa

Sellami

Slimi

2016

IJAES

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This research investigates the effect of mandatory transition of South African companies to IFRS on earnings management, essential attribute of accounting quality. Specifically, the study examines whether the mandatory adoption of IFRS is associated with reduction of earnings management and therefore, an improvement of accounting quality. In addition, the paper focuses on the effect of corporate governance factors on earnings management. Earnings management is assessed by the magnitude of discretionary accruals and accruals quality. The paper compares earnings management in the pre-mandatory IFRS adoption period; 2002-2004 and the post IFRS adoption period; 2010-2012. This study focuses on a sample of 276 firm-year observations, 46 firms drawn from the 413 South African listed companies. A regression model was applied to examine the relation between mandatory adoption of IFRS, corporate governance mechanisms and discretionary accruals controlling for other some factors explaining earnings management. Our findings show that mandatory adoption of IFRS by South African companies is associated with lower earnings management. This result suggests that mandatory transition to IFRS contribute to an improvement in the quality of accounting information. Furthermore, results show that the percentage of independent outside directors, the separation of roles of CEO and Chairman of the board and company size have significant influence on reducing discretionary accruals.

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The effects of board characteristics on earnings management

Cited by 103 publications

References 25 publications

Corporate Governance and Tobin's Q as a Measure of Organizational Performance

Corporate Governance and Tobin's Q as a Measure of Organizational Performance

Does Ownership Structure Affect Jordanian Companies’ Tendency to Practice Earnings Management?

The effect of the mandatory adoption of IAS/IFRS on earnings management: Empirical evidence from South Africa

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