How Effective is Board Independence to the Monitoring of Earnings Manipulation?

Busirin, Mohd Fazrin; Azmi, Nurul; Zakaria, Nor Balkish

doi:10.1016/s2212-5671(15)01177-6

Cited by 24 publications

(27 citation statements)

References 22 publications

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“…This result does not support the finding of Zgarni et al (2014) and Busirin et al (2015) that independent commissioner board can reduce earnings manipulation behavior, because of independent commissioner board ability in monitoring the earnings process. The insignificant correlation shows that independent commissioner board does not have optimal role in corporate governance mechanism.…”

Section: Hypothesis Resultscontrasting

confidence: 96%

“…This result does not support the finding of Zgarni et al (2014) and Busirin et al (2015) that independent commissioner board can reduce earnings manipulation behavior, because independent commissioner board ability in monitoring the earnings process will dismiss the ineffective director team and will encourage management allocate to resources into optimum return (Schipper, 1989 ;Xie et al, 2003). The higher proportion of independent board shows the higher chance to avoid selfish behavior by management (Manzaneque et al, 2016).…”

Section: Introductioncontrasting

confidence: 59%

“…Independent commissioner board can reduce earnings manipulation behavior because the board has ability pressure from inside firm and monitor earnings process (Busirin et al, 2015). Kamalluarifin (2016) states that independent commissioner board can interrupt management to publish unreliable financial statement.…”

Section: The Independent Commissioner Boardmentioning

confidence: 99%

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The Type I Versus Type II Agency Conflict on Earnings Management

Nurim

Sunardi

Raharti

2017

JDM

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This study aims to detect the background of earnings management behavior in which it shows the tendency of type I or II agency conflict. The high ownership concentration of firms in Indonesia leads type II agency conflict, but the good corporate governance formulation assumes conflict between management and shareholders. This study uses published data in IDX from [2009][2010][2011][2012][2013][2014]. TThe result reveals that reputation quality has negative significant correlation to earnings management behaviors, but corporate governance quality has insignificant correlation to earnings management, except percentage of independent commissioner board in moderate level. It has implication that management faces type II agency conflict. The majority may monitor management directly, so the finding reveals that independent commissioner board' s function is not optimum as part of corporate governance mechanism. According to the evidence, corporate governance formulation, especially in Indonesia, should be needed for reducing earnings management on type II tendency. Info Article

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Section: Hypothesis Resultscontrasting

confidence: 96%

“…This result does not support the finding of Zgarni et al (2014) and Busirin et al (2015) that independent commissioner board can reduce earnings manipulation behavior, because independent commissioner board ability in monitoring the earnings process will dismiss the ineffective director team and will encourage management allocate to resources into optimum return (Schipper, 1989 ;Xie et al, 2003). The higher proportion of independent board shows the higher chance to avoid selfish behavior by management (Manzaneque et al, 2016).…”

Section: Introductioncontrasting

confidence: 59%

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The Type I Versus Type II Agency Conflict on Earnings Management

Nurim

Sunardi

Raharti

2017

JDM

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“…The other study reveals that investor protection correlates to auditor [6][7][8]. The next study also reveal that investor protection correlates to financial performance or management behavior [9][10][11][12][13][14][15][16][17]. The findings imply the society's value surrounding the company in where operates could encourage management to behave ethically, such as less aggressive to maximize himself/herself interest.…”

Section: Introductionmentioning

confidence: 69%

The Effect of Local Value on Financial Performance in Digital Society Era

Nurim¹

2019

Proceedings of the 1st International Conference on Economics, Business, Entrepreneurship, and Finance (ICEBEF 2018)

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The digital era reduces the boundaries obstacles between societies. However, the local value still has role because the value encourages the management to behave ethically. The aim of this study is to provide empirical evidence about the important role of local wisdom value to encourage the optimal financial company performance. This study uses the local value, such as Islamic Value, that has recognized formally by Indonesia Government as Jakarta Islamic Index. Management considers the Islamic Sharia as local wisdom value of Indonesian to behave ethically. The result shows that local value has significant positive effect to financial performance. The result also supported by the finding that corporate governance score that has formulated globally is insignificant different between the members of Jakarta Islamic Index and Non Jakarta Islamic Index. The result implies that local wisdom can be considered on digital era as the part of corporate governance formulation because it captures the certain region characteristics. This study contributes to agency theory through the awareness of management on local value emerged from local wisdom value to align with shareholder's interest. This study also contributes to the implementation of corporate governance practice, because the local wisdom value can become the social enforcement for management to behave ethically.

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“…Apparently, the level of objectivity and monitoring capabilities of corporate boards could possibly be strengthened through the constitution of boards with higher proportion of independent/non-executive directors who by their very nature, are external to the organization and less likely to be influenced by companies' management or their representatives (Li, Lu, Mittoo & Zhang, 2015;Fuzi et al, 2016). This notion has spurred research interests geared towards unveiling the link between board independence and variables like performance, CSR disclosure, reporting quality and by extension, earnings management (Jaggi, Leung & Gul, 2009;Gulzar & Wang, 2011;Busirin, Azmi & Zakaria, 2015;Chen, Cheng & Wang, 2015;Rashid, 2018;Naciti, 2019). Specifically, a good number of studies that examined the association between the independence of corporate boards and earnings management have so far reported contradictory findings.…”

Section: Board Independencementioning

confidence: 99%

Board Structure of Corporate Organizations and Earnings Management: Does Size and Independence of Corporate Boards Matter for Nigerian Firms?

Ideh

Jeroh

Ebiaghan

2021

IJFR

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The relationship subsisting between board structure of corporate organizations and earnings management has attracted several concerns particularly to regulatory agencies, management, accounting practitioners and researchers alike. Therefore, this study, examined the extent to which board independence and size influence the level of earnings management of publicly quoted Nigerian firms. For this purpose, the adoption of the International Financial Reporting Standards (IFRS) and the age of firms were introduced as mediating variables. Secondary data were however pooled from the financial statements of ninety-two (92) firms cutting across ten (10) industrial sectors from 2007–2018 (12 years). The regression analysis amidst other relevant statistical techniques was adopted to analyze the collated pooled data. Evidence from our result indicates that with the introduction of IFRS adoption and firm age as mediating variables, the Fcal obtained was 1.72 (p-value = 0.1424), thus indicating that the size of boards and the presence of independent directors (board independence) in corporate boards could not significantly influence the level of earnings management in Nigerian firms. We therefore recommend that in order to regulate managements’ opportunistic behavior/earnings management, regulators and stakeholders who are charged with the task of performing oversight functions on the activities of management should lay more emphasis on ensuring that preparers of financial statements fully comply with the provisions of IFRS and other regulatory requirements for financial reporting.

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How Effective is Board Independence to the Monitoring of Earnings Manipulation?

Cited by 24 publications

References 22 publications

The Type I Versus Type II Agency Conflict on Earnings Management

The Type I Versus Type II Agency Conflict on Earnings Management

The Effect of Local Value on Financial Performance in Digital Society Era

Board Structure of Corporate Organizations and Earnings Management: Does Size and Independence of Corporate Boards Matter for Nigerian Firms?

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