The Role Of Board Characteristics In Mitigating Management Opportunism: The Case Of Real Earnings Management

Talbi, Dorra; Omri, Mohamed Ali; Guesmi, Khaled; Ftiti, Zied

doi:10.19030/jabr.v31i2.9147

Cited by 39 publications

(44 citation statements)

References 36 publications

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“…This might be due to family dominance on boards and appointments based on kinship or friendship. This result is also supported by previous REM studies, for example Talbi et al (2015) and Kang and Kim (2012). Further, in line with Ge and Kim (2014), REM through over-production is more prevalent with CEOduality.…”

Section: ----supporting

confidence: 88%

“…Drawing upon OECD and UK recommendations (OECD, 2004;and Cadbury, 1992), the 2009 JCGC recommends that at least one-third of board members should be independent. This approach is supported by findings in most previous literature, both for AEM, for example Beasley (1996) and Dechow et al (1996), Klein (2002) , Peasnell et al (2005), Roodposhti and Chashmi (2011), Uadiale (2012) and Chen and Zhang (2014) and for REM, for example Osma (2008), Kang and Kim (2012) and Talbi et al (2015). In a Jordanian context there has been one study undertaken by Abed et al (2012) which researched the role of independent directors in deterring AEM before the 2009 JCGC introduction, finding no significant relationship between board independence and AEM.…”

Section: Board Independencesupporting

confidence: 88%

“…Previous AEM empirical results appear to be inconclusive with Klein (2002), Peasnell et al (2005) and Ghosh et al (2010) finding larger boards effective in constraining EM, but others, including Rahman and Ali (2006) and Ball and Shivakumar (2008), concluding the reverse. In the REM literature, Kang and Kim (2012) provide evidence that REM decreases as board size increases, whilst Talbi et al (2015) finds the opposite and others (e.g. Osma, 2008) find no association.…”

Section: Board Sizementioning

confidence: 94%

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The impact of corporate governance mechanisms on real and accrual earnings management practices: evidence from Jordan

Al‐Haddad

Whittington

2019

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Purpose This paper aims to investigate the impact of corporate governance (CG) mechanisms on real (REM), accrual-based earnings management (AEM) and REM/AEM interaction in Jordan following the 2009 Jordanian CG Code (JCGC). Design/methodology/approach The study used a sample of 108 Jordanian public firms covering 2010-2014. Hypotheses are tested using pooled OLS-regression models. Findings The authors find that both institutional and managerial ownership constrain the use of REM and AEM. In contrast, both independent directors and large shareholders are found to exaggerate such practices, and CEO-duality is found to exaggerate REM only. However, foreign ownership does not appear to have a significant impact. They further find that managers use REM and AEM jointly to obtain the greatest earnings impact. Practical implications The findings have important implications for policymakers, regulators, audit professionals and investors in their attempts to constrain earnings management (EM) practices and improve financial reporting quality in Jordan. Originality/value The authors believe this to be the first Jordanian study examining the relationship between CG mechanisms and both REM and AEM following the introduction of the 2009 JCGC, as well as the first in Jordan and the Middle East to examine board characteristics and REM. Moreover, it is the first to test for the potential substitution of REM and AEM since the 2009 JCGC enactment. As such, the findings draw attention to EM practices and the role of monitoring mechanisms in Jordan.

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Section: ----supporting

confidence: 88%

Section: Board Independencesupporting

confidence: 88%

Section: Board Sizementioning

confidence: 94%

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The impact of corporate governance mechanisms on real and accrual earnings management practices: evidence from Jordan

Al‐Haddad

Whittington

2019

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“…Some stream of studies show that negative relationship exist between board attributes and earnings management (Abdul Manaf, Amran and Ishak, 2015;Bala and Gugong, 2015;Guo and Ma, 2015). In like manner, Talbi et al (2015) discover that board attributes have a negative association with the level of earnings management. Likewise, Uwuigbe, Peter, and Oyeniyi (2014) shows that board structure has significant adverse effect on earnings management.…”

Section: Hypothesis Development and Methodologymentioning

confidence: 98%

The Effect of Board Attributes on Real Earnings Management in Nigerian Financial Institutions

Abubakar

Ishak

Sitraselvi

et al. 2017

Journal of Accounting, Business and Finance Research

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The purpose of this study is to examine the relationship between board attributes and real earnings management of listed Nigerian financial institutions. The residuals from Roychowdhury model (2006) is used to proxy real earnings management. Data were collected from 45 financial institutions quoted on the Nigerian Stock Exchange (NSE) from 2011 to 2016. For analysis purpose, the Panel Corrected Standard Errors (PCSEs) regression was utilized. The regression result shows that board meeting and board expertise have a significant positive impact on real earnings management. Whereas, female directors has a significant negative influence on real earnings management. The study recommends that the authorities concerned in Nigeria should concentrate on the recent technique of real earnings management (cash flow from operation, discretionary expenses and cost of goods sold) known to board members in developed economies in order to play a pivotal role in constraining corporate managers to act opportunistically in the ordinary course of business activities and preparing financial reports.

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“…This switch in earnings management practices has created a need to bring REM into public view. In this regard, Talbi, Omri, Guesmi, and Ftiti (2015) pointed out that previous studies have mostly focused on AEM, whereas REM has remained largely unexplored area. To address this issue, this current paper reviews the recent literature of REM by specifically covering: 2) earnings management definitions and types; 3) the underpinning theories widely used in earnings management literature; 4) important studies on REM; 5) methodology of this paper; and 6) conclusion and suggestions for future research.…”

Section: Introductionmentioning

confidence: 99%

Real Earnings Management: A Review of Literature and Future Research

Ali¹,

Kamardin²

2018

AJFA

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In recent years, increasing attention has been given to real earnings management (REM) as an alternative method to accrual-based earnings management. This paper reviews the recent studies on REM to provide updated and comprehensive information about this type of earnings management. Specifically, the review focuses on REM definitions, motivations, techniques, consequences, and measurement. In addition, the paper provides a discussion of the theoretical frameworks used by researchers as underpinning theories of earnings management. The review of the literature showed that companies have shifted earnings management practising from accruals-based to real activities based. Useful suggestions for REM research opportunities are also provided.

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The Role Of Board Characteristics In Mitigating Management Opportunism: The Case Of Real Earnings Management

Abstract: ABSTRACT

Cited by 39 publications

References 36 publications

The impact of corporate governance mechanisms on real and accrual earnings management practices: evidence from Jordan

The impact of corporate governance mechanisms on real and accrual earnings management practices: evidence from Jordan

The Effect of Board Attributes on Real Earnings Management in Nigerian Financial Institutions

Real Earnings Management: A Review of Literature and Future Research

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