Audit Committee’s Cash Compensation and Earnings Management: The Moderating Effects of Institutional Factors

Alkebsee, Radwan Hussien; Alhebry, Adeeb A.; Tian, Gaoliang; Garefalakis, Alexandros

doi:10.1080/02102412.2021.1977558

Cited by 5 publications

(12 citation statements)

References 96 publications

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“…As a result, it is concluded that NEDs fees and allowances have a positive and significant effect on EM practices, in line with objective three. This resonates with the findings of Alkebsee et al (2021) who found a positive association between the compensation of audit committee members (usually NEDs) and accrual EM in the organisation. H04: Chairman compensation do not significantly affect EM practices in the Nigerian financial sector.…”

Section: Descriptive Statistics Of Variablessupporting

confidence: 87%

Directors’ Compensation and Earnings Management Practices: Evidence from the Nigerian Banking Sector

Salawu,

Adeyemi,

Obigbemi

2024

IJBT

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Compensation contracts is one of the tools recommended by theorists and scholars towards ensuring that directors perform their function of effective monitoring of an organisation. However, this may induce earnings management (EM) practices as a result of being tied to accounting earnings or stock prices. The study thus evaluated the effect of directors’ compensation on EM practices within the Nigerian banking sector anchored on the Agency Theory. Adjusted population of eleven listed commercial banks was used as the census sampling method was employed. Directors’ compensation was measured using a mix of executive directors and non-executive directors (NEDs) compensation while EM practices was proxy by discretionary provision for loan loss (DPLLs) measured using the Beaver and Engel (1996) model. Using the ordinary least square (OLS) regression, all forms of directors’ compensation except executive compensation were found to have positive effect on EM practices. However, only NEDs fees and allowances was found to have a significant effect on EM practices necessitating the regulation of directors’ compensation. The study concluded that directors’ compensation does affect EM practices of listed banks in Nigeria though to varying extent depending on the kind of compensation. The study recommended a shift of focus from just Chairman compensation to include the totality of NEDs compensation and an institution of guidelines for mandatory disclosure of directors’ compensation. The study thus provides practical contribution for regulatory authorities towards ensuring that the accounting process is rid of EM practices as well as investors by consolidating confidence in the Nigerian banking sector.

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Section: Descriptive Statistics Of Variablessupporting

confidence: 87%

Directors’ Compensation and Earnings Management Practices: Evidence from the Nigerian Banking Sector

Salawu,

Adeyemi,

Obigbemi

2024

IJBT

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“…Based on the t statistical test conducted, the results obtained are that the audit committee variable has a probability of 0.1445 which means (probability > 0.05) which can be said that the age of the audit committee has no effect on the integrity of financial reports. Based on the audit committee formula Qi & Tian (2012) and Alkebsee, et al (2022), it is explained that the audit committee can be measured by a proxy for the age of the audit committee which is measured by the logarithm of the total age of audit members divided by the total number of audit committee members.…”

Section: Multiple Linear Regression Test Resultsmentioning

confidence: 99%

“…The audit committee assists the duties and functions of the board of commissioners. Audit committee according to research Qi & Tian (2012) and Alkebsee, et al (2022) is measured using age indicators as a consideration of the integrity of financial statements, namely as follows:…”

Section: Audit Committeementioning

confidence: 99%

“…Age can reflect an attitude of resistance and experience in taking corporate risks. The older the age of an audit committee member is more conservative in ensuring the effectiveness of the external auditor's control system and the internal auditor's experience in corporate finance is better than the younger age of the audit committee member (Alkebsee, et al, 2022). With excess experience in their field, an audit committee the integrity of financial statements will be maintained and contain accurate information to reduce agency conflict between agent and principal, thereby increasing public confidence in a company's financial statements.…”

Section: Audit Committeementioning

confidence: 99%

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Determinants of Financial Statements Integrity in Company Index Kompas 100

Mashuri

Ermaya²,

Fahria³

2023

j. inf. perpajak. akunt. keuang. n.a.

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This study aims to empirically examine the effect of independent commissioners, audit committees, KAP size, and intellectual capital, on the integrity of financial statements. This study uses a population of companies with the Kompas 100 index listed on the Indonesia Stock Exchange in the 2018-2021 period. This study uses quantitative methods with data obtained from the company's financial statements and company annual reports or using secondary data. The samples in this study were 40 companies using purposive sampling. The techniques used in analyzing the research data are model specification using multiple regression tests, using the EViews as tools. The results of the study show that (1) independent commissioners have an impact on the integrity of financial statements, (2) the audit committee has no impact on the integrity of financial statements, (3) PAF size has no significant impact on the integrity of financial statements, (4) Intellectual Capital does not have significant impact on the integrity of financial statements.

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“…The role of independent directors' compensation in the quality of financial reporting has mixed results in the literature. Alkebsee et al (2021) report a positive connection between the audit committee directors cash compensation and earnings management. Hope et al (2019) find a significant relation between independent directors' cash compensation and related party transection.…”

Section: Independent Director's Cash Compensation and Corporate Fraudmentioning

confidence: 98%

Does Independent Director’s Cash Compensation Matter? Evidence From Corporate Fraud

Alkebsee

Tian

Garefalakis

et al. 2022

Journal of Business Economics and Management

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This study empirically investigates the relationship between independent directors’ cash compensation and the likelihood of corporate fraud. Using data of 2542 Chinese firms and 17239 firm years from 2010 to 2017, the findings of logistic regression, firm-fixed effects, instrumental variable specification, and propensity score matching models show that there is a negative association between cash compensation of independent directors and corporate fraud. Our findings suggest that if independent directors are treated with higher cash compensation, it enhances the board’s independence and makes the effective monitoring over management behaviors and financial reporting process. On contrary to non-SOEs, the findings also document that the negative association between independent directors’ compensation and corporate fraud is pronounced in SOEs. The study not only shows the impact of independent director’s compensation on firm fraud beyond agency and contract theories but also creates policy implications regarding independent director’s compensation in particular scenario of emerging economies.

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Audit Committee’s Cash Compensation and Earnings Management: The Moderating Effects of Institutional Factors

Cited by 5 publications

References 96 publications

Directors’ Compensation and Earnings Management Practices: Evidence from the Nigerian Banking Sector

Directors’ Compensation and Earnings Management Practices: Evidence from the Nigerian Banking Sector

Determinants of Financial Statements Integrity in Company Index Kompas 100

Does Independent Director’s Cash Compensation Matter? Evidence From Corporate Fraud

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