Can Audit Committee Reduce Real Earnings Management?

Susanto, Yulius Kurnia; Pradipta, Arya

doi:10.34208/jba.v22i1.747

Cited by 7 publications

(13 citation statements)

References 26 publications

(27 reference statements)

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“…Many or at least the number of boards of directors is not a determining factor for the occurrence of real earnings management because the decision to do earnings management is more driven by situations, conditions such as pressures or certain opportunities, not by the number of boards of directors owned by the company. The findings do not support previous research by Susanto & Pradipta (2020), which showed that a larger board of directors could reduce real earnings management actions because more and more parties supervise and have good information about the company.…”

Section: Discussioncontrasting

confidence: 99%

“…Based on its role in the company, it is expected that more and more members of the board of directors will minimize the rate of earnings manipulation (Yunietha & Palupi, 2017). However, previous research results by Shahwan & Almubaydeen (2020), Abbasi & Qomi (2017); Susanto & Pradipta, 2016;Susanto & Pradipta (2020) shows that the board of directors has a negative effect on real earnings management. The board of directors is an internal party responsible for the company's operations, so it maximizes the company's welfare.…”

Section: Board Of Directors Size and Real Earnings Managementmentioning

confidence: 90%

“…The more directors in a company are expected to be the optimal management of the company's business. The board of directors in this study was measured by the number of directors in a company (Susanto & Pradipta, 2020).…”

Section: Board Of Directorsmentioning

confidence: 99%

See 2 more Smart Citations

Board of Directors, Ceo Experience, Ceo Tenure in Three Real Earnings Management Measurement Approaches

Sonda

Sutrisno

2022

ULTIMA Accounting

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Abstract— This study aims to examine several factors that are thought to influence real earnings management. Board of directors size, CEO experience, CEO tenure, company age and profitability on real earnings management. This study grouped real earnings management proxies into three test models, abnormal production and abnormal discretionary expenditure (REM1); abnormal operating cash flow and abnormal discretionary expenditure (REM2); abnormal operating cash flows, abnormal production and abnormal discretionary expenditure (REM3). The three categories of real earnings management are intended to assess the robustness of the test results. The sample of this research is manufacturing companies listed on the Indonesia Stock Exchange during the period 2018-2020. Fifty-eight manufacturing companies meet the sampling criteria so the total sample data obtained is 174. The data of this study were analyzed using random effect panel data. This study's results indicate that profitability negatively affects real earnings management in all real earnings management testing categories. Board of directors, CEO experience, CEO tenure, and company age do not affect real earnings management. The research implies developing knowledge about the factors that influence real earnings management. This study provides empirical evidence that the company's ability to generate high profits can reduce the impetus of company management to perform real earnings management. The findings of this study have implications for investors as a consideration in making decisions that the company's ability to generate profits is a positive indication that the company has good prospects in the future and can reduce the impetus for real earnings management. Keywords: Board of Directors; CEO Experience; CEO Tenure; Profitability; Real Earnings Management

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Section: Discussioncontrasting

confidence: 99%

Section: Board Of Directors Size and Real Earnings Managementmentioning

confidence: 90%

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Board of Directors, Ceo Experience, Ceo Tenure in Three Real Earnings Management Measurement Approaches

Sonda

Sutrisno

2022

ULTIMA Accounting

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“…However, different attributes of the audit committee contribute to determining earnings management behaviour. To make it easier for companies to see an effective financial reporting system, it is better for companies to have an audit committee that has experience or expertise in finance and accounting (Susanto & Pradipta, 2020). Of the total members of the audit committee, there should be at least one member who can be in the field of accounting or finance and the chairman of the audit committee can at least read and understand the financial statements.…”

Section: Real Earnings Managementmentioning

confidence: 99%

Ownership Concentration and Earnings Management of Listed Manufacturing Firms in Nigeria: Audit Committee Financial Expertise

Irom¹,

Okpanachi²,

Ahmed³

et al. 2023

IJBMR

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Significant corporate shareholders can exert undue pressure on managers to enhance earnings in order to increase corporate value, and that as a result of this undue pressure, managers to resort to earnings management practice in the corporations they manage. This study examined the moderating role of audit committee expertise on the relationship between ownership concentration and real-earnings management in Nigeria. The independent variable (ownership concentration) was measured as shareholders who have more than 5% equity stake in a company, and real-earnings management was measured using the Roychowdhury approach. Audit committee financial expertise which is the moderator, was measured in binary form, 1 if at least one member of the committee has accounting experience, and 0 otherwise. This paper used a sample of 34 manufacturing companies listed on the Nigerian Exchange (NGX) over a period of 15 years from 2007 to 2021. Data was collected from the annual financial reports of the sampled companies. Descriptive statistics, Pearson correlation and Quantile regression was employed for data analysis and the findings show OWNCON has a positive and insignificant effect on REM. However, when audit committee financial expertise was used as a moderator, the effect of ownership concentration on the real- earnings management of listed manufacturing companies in Nigeria became statistically significant. Based on the findings, the study recommends that manufacturing companies should have more concentrated owners because the higher the concentration the less tendency of REM of listed manufacturing companies in Nigeria.

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“…However, studies that are more recent provide evidence that strong AC financial expertise may inadvertently encourage managers to increase REM. For example, Susanto and Pradipta (2020) suggest that ACs, which have strong financial expertise, may pressure managers to engage in REM. They used 336 observations from 84 public manufacturing companies from 2013 to 2016 and note that AC financial expertise is positively associated with REM.…”

Section: Ac Financial Expertise Aem and Remmentioning

confidence: 99%

Audit committee financial expertise, accrual, and real earnings management

Cheung

Adelopo

2022

J Corp Accounting Finance

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This study examines the effectiveness of audit committee (AC) financial expertise in mitigating accrual and real earnings management (AEM and REM hereafter). Although extant studies have examined the effects of AC expertise on earnings management, findings are inconclusive. Prior studies have also focused mainly on AEM not REM. We used the data for a sample of Hong Kong Hang Seng Composite Index with 1714 firm‐year observations between 2010 and 2015, which was analyzed using panel fixed effect regression models. The results show statistically significant negative relationship between AC financial expertise and AEM but surprisingly, we find that AC financial expertise is associated with increase in REM. We argue that whilst AC members have developed monitoring skills on AEM, REMs are relatively recent and are more complicated to detect. We argue that management may be shifting their opportunistic use of earnings management from AEM to REM. A possible reason could be a steep AC's learning curve on the nature of REM. Our investigation provides evidence on the impact of AC expertise on both AEM and REM from a unique context.

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Can Audit Committee Reduce Real Earnings Management?

Cited by 7 publications

References 26 publications

Board of Directors, Ceo Experience, Ceo Tenure in Three Real Earnings Management Measurement Approaches

Board of Directors, Ceo Experience, Ceo Tenure in Three Real Earnings Management Measurement Approaches

Ownership Concentration and Earnings Management of Listed Manufacturing Firms in Nigeria: Audit Committee Financial Expertise

Audit committee financial expertise, accrual, and real earnings management

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