Is audit committee busyness associated with earnings management? The moderating role of foreign ownership

Abstract

Purpose An audit committee (AC) whose members hold multiple directorships can adversely affect a firm’s earnings management (EM) behavior due to a lack of time that can prevent members from performing their responsibilities effectively. This paper aims to investigate the moderation role of foreign ownership (FOWN) on audit committee multiple directorships (ACMD) as it relates to accrual EM. Design/methodology/approach Using a sample of 528 observations for Palestinian listed companies over 2009–2019, this research used panel data regression to explore the specified relationships. Additionally, the study conducted a regression analysis using alternative measurements of the ACMD and the extended modified Jones model (2006) to assess robustness. Furthermore, generalized method of moments and a two-stage least squares method were used to address potential endogeneity concerns. Findings The results show that multiple directorships lead to a scarcity of time that can adversely affect efficient management oversight and documented an adverse association between FOWN and discretionary accruals. The results are consistent with agency theory that FOWN brings in expertise and experience from countries with strong governance to benefit local firms and thus recover control, lower agency costs, raise a firm’s value and thus alleviate EM. Originality/value This study provides unique explanations and recommendations for restraining excessive ACMD because this practice decreases managers’ ability to decrease EM. The mixed outcomes in earlier literature on the AC characteristics and EM also indicate a contingent role that may clarify this inconsistency.

Board Gender Diversity and Cost of Debt: Evidence from MENA Region: Conceptual Paper

“…This phenomenon, commonly called the 'golden skirts,' has been extensively discussed (Yu & Madison, 2021). Therefore, researchers have shown increasing interest in creditors' perception of good governance because of the global significance of debt markets as a significant source of external financing (Miah et al, 2023;Saleh & Mansour, 2024). Thus, implementing a robust governance structure that promotes greater diversity on corporate boards would mitigate the risk of shareholders and creditors falling victim to expropriation (Mansour et al, 2023a;Mansour et al, 2024a).…”

“…Consequently, companies with less debt incur lower costs, while those with more debt incur higher costs. Furthermore, elevated debt levels within firms can increase susceptibility to financial insolvency or bankruptcy (AL-Nawafleh et al, 2019;Saleh & Mansour, 2024), thus impacting their overall stability (Bradley & Chen, 2015). Increasing research examines how including women directors on corporate boards affects a company's borrowing costs.…”