The affiliations and characteristics of female directors and earnings management: evidence from Turkey

2020 ◽  
Vol 35 (7) ◽  
pp. 927-953
Author(s):  
Emrah Arioglu
Keyword(s):  
Earnings Management ◽  
Audit Committee ◽  
Business Groups ◽  
Institutional Setting ◽  
Omitted Variables ◽  
Reverse Causality ◽  
Data Set ◽  
Content Type ◽  
Female Directors ◽  
The Relationship

Purpose This study aims to investigate whether the presence of female directors with specific attributes has an effect on earnings quality in a patriarchal emerging country with a collectivistic culture and a substantial gender equality gap and where the majority of companies are controlled by large business groups. Design/methodology/approach The current study uses a unique hand-collected data set that covers all non-financial companies listed on the Borsa Istanbul between the years 2009 and 2017, using the GMM method to overcome potential omitted variables and reverse causality problems. Findings The current study demonstrates that the presence of female directors on company boards is not associated with earnings management. Similar results are obtained for the percentage of female directors with specific attributes such as busyness, professional expertise and audit committee membership. Surprisingly, the results suggest that there is a negative (positive) relationship between the percentage of female directors that are affiliated (unaffiliated) with controlling business groups and earnings management. Originality/value The current study tests the relationship between the presence of female directors and earnings management in a cultural and institutional setting that is substantially different from countries where the majority of previous research on female directors has been conducted. In addition, this study puts a special emphasis on female director affiliation and provides evidence that contradicts the expectation regarding the direction of the relationship between the percentage of affiliated female directors and earnings management.

Female board members: the effect of director affiliation

2020 ◽  
Vol 35 (2) ◽  
pp. 225-254 ◽  
Author(s):  
Emrah Arioglu
Keyword(s):  
Financial Performance ◽  
Generalized Method Of Moments ◽  
Omitted Variables ◽  
Reverse Causality ◽  
Data Set ◽  
Content Type ◽  
Cultural Setting ◽  
Management Culture ◽  
Female Directors ◽  
Positive Effect

Purpose This study aims to investigate whether female directors have an effect on company financial performance in a patriarchal emerging country that has a collectivistic culture with a substantial gender equality gap and is characterized with a paternalistic management culture. In addition, it aims to investigate whether the affiliations of female directors matter performance-wise in a setting where the majority of the companies are ultimately controlled by large business groups including families. Design/methodology/approach The current study uses a unique hand-collected data set that covers all non-financial public companies quoted at the Borsa Istanbul between the years 2009 and 2017. To investigate the relationships between the presence and ratio of female directors and company financial performance, the current study uses the pooled ordinary least squares method, as well as the firm-fixed effects method to overcome potential omitted variables problems and various generalized method of moments methods to overcome potential reverse causality problems. Findings The findings of the current study demonstrate that the presence and percentage of female directors both have a positive effect on company financial performance in a cultural setting where the opposite might be expected. They also present evidence suggesting that the effect becomes larger as the level of the independence of female directors becomes greater. Originality/value The current study demonstrates that the presence of female directors on boards has a positive effect on company financial performance, even in a cultural setting that is very different from those of countries where the majority of previous studies on female directors are conducted on. In addition, it demonstrates how company financial performance varies with the level of the affiliation of female directors.

The role of audit committees in mitigating earnings management: evidence from Jordan

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Taha Almarayeh ◽  
Modar Abdullatif ◽  
Beatriz Aibar-Guzmán
Keyword(s):  
Developing Countries ◽  
Earnings Management ◽  
Audit Committee ◽  
Discretionary Accruals ◽  
Least Square ◽  
Audit Committees ◽  
Institutional Setting ◽  
Content Type ◽  
The Impact

PurposeThis study examines the relationship between audit committees (ACs) and earnings management (EM) in the developing country context of Jordan. In particular, it investigates whether audit committee attributes, including their size, independence, expertise and meetings, are able to restrict discretionary accruals as a proxy for EM.Design/methodology/approachThe generalized least square (GLS) regression was used to study the association between audit committee attributes and discretionary accruals, as a proxy of EM, for a sample of industrial firms listed on the Amman Stock Exchange (ASE) during the period 2012–2020. Data were obtained from the firms' annual reports.FindingsThe regression results indicate that audit committee independence is the only audit committee attribute that seems to improve the effectiveness of ACs, in that it is significantly associated with less EM, while other audit committee attributes that were tested do not show statistically significant associations.Research limitations/implicationsIn emerging markets, like Jordan, ACs may not be an efficient monitoring mechanism; therefore, it can be argued that the prediction made by the agency theory about the role of ACs in mitigating opportunistic EM activities does not necessarily apply to all contexts.Practical implicationsA better understanding of audit committee effectiveness in developing countries could help regulators in these countries assess the impact of planned corporate governance (CG) reforms and to better monitor and enhance the performance of ACs.Social implicationsIn a setting characterized by closely held companies, high power distance and low demand for high-quality CG mechanisms, this study contributes to understanding how this business system operates, and how improving CG mechanisms could be successful in such cultures.Originality/valueThis study investigates the under-researched relationship between audit committee characteristics and EM in developing countries. In so doing, it aims to provide new insights into this relationship within the developing context case of Jordan, including if and how the institutional setting influences this relationship.

Audit committee effectiveness, audit quality and earnings management: a meta-analysis

2016 ◽  
Vol 58 (2) ◽  
pp. 179-196 ◽  
Author(s):  
Zgarni Inaam ◽  
Halioui Khamoussi
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Audit Committee ◽  
Audit Quality ◽  
Good Governance ◽  
Meta Analysis ◽  
Negative Relationship ◽  
Real Earnings Management ◽  
Institutional Setting ◽  
Content Type

Purpose – Many researchers, in several contexts, have investigated the influence of audit committee effectiveness and audit quality variables on reducing the extent of earnings management, and empirical evidence is rather inconsistent. Design/methodology/approach – The aim of this paper is to meta-analyze the results of 58 prior studies that examined whether differences in results are related to moderating effects associated with corporate governance mechanisms or measures of earnings management. Findings – The findings show that the meta-analysis identifies many significant relationships. The independence of the audit committee, its size, expertise and the number of meetings have a negative relationship with earnings management. Similar negative relationships exist between auditor size, specialization and earnings management. Research limitations/implications – This study contributes to the corporate governance literature. Further, recognizing the function of an audit committee and audit quality shows the value of considering an institutional setting in governance research. This study is significant to academic and practitioner literatures, policy makers and professional accounting bodies as it shows that governance reforms promote companies to adopt good governance practices. The results also give useful information to investors in examining the effect of audit committee characteristics and audit quality on earnings quality. Originality/value – This study extends existing research on audit committee and audit quality to oversee both accrual and real earnings management using meta-analysis. Thus, this study has the potential to help stakeholders, board of directors, regulators and auditors, who are related with enhancing the supervision of firms and reducing the opportunities given to managers, to engage in earnings management.

Audit committee and financial reporting quality: the moderating effect of audit quality

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sana Mardessi
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Committee ◽  
Audit Quality ◽  
Reporting Quality ◽  
Moderating Effect ◽  
Real Earnings Management ◽  
Financial Reporting Quality ◽  
Content Type ◽  
The Relationship

Purpose The purpose of this study is to address the impact of audit quality on financial reporting quality proxied by real earnings management. To further clarify the mentioned links, this study empirically assesses the moderating effect of audit quality. Design/methodology/approach The study is based on a sample consisting of 90 non-financial companies that are listed in the Amsterdam stock exchange in AEX all share index over the 2010–2017 period. This study applies a quantitative approach and secondary data as the main source of information for analysis. This paper performs an ordinary least squares regression to examine the moderating effect of audit quality on the relationship between financial reporting quality. Findings Empirical findings demonstrate that corporate governance mechanism, mainly independence members, financial expert and audit committee size has a statistically significant relationship with real earnings management. However, the effect of audit committee meetings on real earnings management is not significant. There is also evidence that audit quality moderates the audit committee – real earnings management links. Originality/value This study extends the existing literature by examining the moderating effect of audit quality on the relationship between financial reporting quality proxied by real earnings management in the Dutch context.

Effect of ownership structure and board structure on firm value: evidence from India

2017 ◽  
Vol 17 (4) ◽  
pp. 700-726 ◽  
Author(s):  
Rakesh Mishra ◽  
Sheeba Kapil
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Performance Measures ◽  
Board Structure ◽  
Tobin’S Q ◽  
Reverse Causality ◽  
Tobin's Q ◽  
Data Set ◽  
Content Type ◽  
The Relationship

Purpose This paper aims to explore the relationship of promoter ownership and board structure with firm performance for Indian companies. Design/methodology/approach Corporate governance structures of 391 Indian companies out of CRISIL NSE Index (CNX) 500 companies listed on national stock exchange (NSE) have been studied for their impact on performance of companies. Panel data regression methodology has been used on data for five financial years from 2010 to 2014 for the selected companies. Performance measures considered are market-based measure (Tobin’s Q) and accounting-based measure (return on assets [ROA]). Findings The empirical findings indicate that market-based measure (Tobin’s Q) is more impacted by corporate governance than accounting-based measure. There is significant positive association between promoter ownership and firm performance. It is also indicated that the relationship between promoter ownership and firm performance is different at different levels of promoter ownership. Board size is found to be positively related to ROA; however, board independence is not found to be related to any of the performance measures. Research limitations/implications Limitations of the study are in terms of data methodology and possible omission of some variables. It is felt that endogeneity and reverse causality might be better addressed using simultaneous equation methodology. Originality/value The paper adds to the emerging body of literature on corporate governance performance relationship in Indian context using a reasonably wider and newer data set.

Effective audit committee, audit quality and earnings management

2016 ◽  
Vol 6 (2) ◽  
pp. 138-155 ◽  
Author(s):  
Inaam ZGARNI ◽  
Khmoussi HLIOUI ◽  
Fatma ZEHRI
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Committee ◽  
Audit Quality ◽  
Reporting Quality ◽  
Ordinary Least Squares ◽  
Financial Reporting Quality ◽  
Institutional Setting ◽  
Financial Security ◽  
Content Type

Purpose – A steady stream of literature has examined relationships between audit committee effectiveness, audit quality and financial reporting quality. The purpose of this paper is to connect these various streams of research to provide an empirical evidence from an Arabic emergent country namely Tunisia. This study examines the role of audit committee effectiveness and audit quality on financial reporting quality particularly to mitigate the earnings management in the Tunisian companies before and after financial security law adoption. Design/methodology/approach – The study uses ordinary least squares regression model to investigate the effect of audit committee characteristics, audit quality attributes and the interaction between these two overseeing mechanisms on earnings management for a sample of 29 non-financial listed Tunisian firms during the period 2001-2009. Findings – The results document a substitute effect between the presence of Big Four auditor and effective audit committee in order to reduce the discretionary accruals before the enforcement of law no. 2005-96 dealing with the financial securities. The authors find a complementarity link between the score of audit committee’s effectiveness and auditor industry specialization’s to constrain earnings management. Finally, the findings show a complementary relation between audit committee’s effectiveness and audit tenure, after the passage of the law. Research limitations/implications – This study shows the value of considering the institutional setting in governance research. This paper is restricted to firms in the Tunisia from 2001 to 2009. Future research should investigate this issue in other settings and periods. Practical implications – This study is important to practitioner and academic literature, policy makers and professional accounting bodies as it shows that legislative reforms can enhance companies to adopt good governance practices in emerging countries. The results also give useful information to investors in examination the effect of audit committee characteristics and audit quality on earnings quality. Another interesting practical focus of this study is to assess how successful was the implementation of financial security law in improving audit transparency and support shareholder involvement in the audit process. Originality/value – The results suggested that governance regulation is a substitute for strong governance mechanisms in both the pre- and post-law periods.

Women directors, family ownership and earnings management in Malaysia

2016 ◽  
Vol 24 (4) ◽  
pp. 525-550 ◽  
Author(s):  
Shamsul Nahar Abdullah ◽  
Ku Nor Izah Ku Ismail
Keyword(s):  
Earnings Management ◽  
Audit Committee ◽  
Audit Committees ◽  
Family Ownership ◽  
Women Directors ◽  
Content Type ◽  
Representation Of Women ◽  
Women On Boards ◽  
The Relationship

Purpose The purpose of this paper is to determine whether the representation of women on the boards (WOMBDs) and audit committees is associated with a reduction in the practice of earnings management and whether women are associated with income reducing (conservative) rather than income-increasing (aggressive) earnings management. The authors further argue that family ownership moderates the relationship between the presence of WOMBDs and audit committees and earnings management. Design/methodology/approach The study uses non-finance firms listed on Bursa Malaysia over a period of four years, i.e. from 2008 until 2011. Findings The evidence reveals that the presence of WOMBD or audit committee is not associated with a propensity for earnings management. In addition, the evidence also reveals that family ownership does not interact either with WOMBD or with women on the audit committee (WOMAC) to influence the propensity for earnings management. Nevertheless, the additional analyses show that, while women on boards are not associated with income-decreasing accruals, the presence of women on audit committees leads to income-reducing earnings management. The evidence further reveals that family ownership does not interact with either WOMBD or WOMAC to influence income-decreasing earnings management. Originality/value This study extends prior research on the role of women directors and women audit committee members on earnings management focussing on family ownership. Further, the study also examines the direction of earnings management as opposed to the most prior studies, which mainly focus on the propensity of earnings management.

Board and audit committee effectiveness, ethnic diversification and earnings management: a study of the Malaysian manufacturing sector

2016 ◽  
Vol 16 (4) ◽  
pp. 726-746 ◽  
Author(s):  
Wan Masliza Wan Mohammad ◽  
Shaista Wasiuzzaman ◽  
Nik Mohamad Zaki Nik Salleh
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Audit Committee ◽  
Manufacturing Sector ◽  
Audit Committees ◽  
Fiscal Year ◽  
Governance Mechanism ◽  
Manufacturing Companies ◽  
Data Set ◽  
Content Type

Purpose This purpose of this paper is to examine the implications of the Revised Malaysian Code on Corporate Governance (2007) toward the effectiveness of the board and audit committees in Malaysian manufacturing companies. Since the manufacturing firms are dominantly held by Chinese firms, this paper is extended to incorporate the implication of ethnicity on board and audit committees’ effectiveness. Design/methodology/approach Using a sample of 201 firms from fiscal year 2004-2009, the data set consists of a total of 1,206 firm-year observations. Analysis is carried out using correlation analysis, multiple and logistic regression analyses. Findings The findings reveal that board and audit committees’ effectiveness is positively associated with earnings management pre- and post-Revised Malaysian Code on Corporate Governance (2007). A higher number of ethnic members in the board are also positively associated with earnings management. Research limitations/implications This study is limited to some industries in the manufacturing sector due to the special characteristics of this sector and covers mostly large firms. The results may not therefore be applicable to small firms. Finally, the study does not consider possible interaction between the board and audit characteristics which may be significant in influencing earnings management. Practical implications The findings show that the corporate governance mechanism in Malaysian firms is currently inadequate in preventing earnings management and extra effort is needed to improve board governance. Originality/value This paper contributes to the current literature on the issues of corporate governance effectiveness and board ethnicity in the current economic and political structure in Malaysia.

Gender diversity in audit committees and audit fees: evidence from China

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Radwan Hussien Alkebsee ◽  
Gao-Liang Tian ◽  
Muhammad Usman ◽  
Muhammad Abubakkar Siddique ◽  
Adeeb A. Alhebry
Keyword(s):  
Audit Committee ◽  
Gender Diversity ◽  
Audit Fees ◽  
Situational Factors ◽  
Audit Committees ◽  
Least Squares Regression ◽  
Content Type ◽  
External Auditors ◽  
Female Directors ◽  
The Relationship

Purpose This study aims to investigate whether the presence of female directors on audit committees affects audit fees in Chinese listed companies. This study also investigates whether the audit committee’s gender diversity moderates the relationship between the firm’s inherent situational factors (e.g. audit complexity and firm risk) and audit fees. Finally, this study investigates whether the effect of the audit committee’s gender diversity on audit fees varies with within-country institutional contingencies (e.g. state-owned enterprises [SOEs] vs non-SOEs and firms that are located in more developed regions vs firms that are located in less developed regions) Design/methodology/approach This study used the data of all A-share listed companies on the Shanghai and Shenzhen stock exchanges for the period from 2009 to 2015. The authors use ordinary least squares regression as a baseline methodology, along with firm fixed effect, Deference in Deference method, two-stage least squares regression, two-stage Heckman model and generalized method of moments models to control for the possible issue of endogeneity. Findings The study’s findings suggest that the presence of female directors on the audit committee improves internal monitoring and communication, which reduce the perceived audit risk and the need for assurances from external auditors. The results also suggest that female directors demand high-quality audits and further assurance from external auditors when the firm is more complex and riskier. In addition, the results suggest that within-country, institutional factors play significant role in shaping the governance role of gender-diverse audit committee. Practical implications The study contributes to the agency theory by providing evidence that the interaction between agency theory and corporate governance “board composition” generates an effective monitoring mechanism and contributing to the institutional theory by finding that role of female directors on audit committee varies from context to another. In addition, this study contributes to literature review of gender diversity in the boardroom by finding the economic benefit of having female directors on audit committee. Finally, this study has implications for policy-makers in promoting regulations to legalize women presence on the board, to external auditors in assessing control risk during planning the audit, to those who responsible for appointing audit committee members. Originality/value The authors extend earlier studies by providing novel evidence on the relationship between gender-diverse audit committees and audit fees in terms of both the supply- and demand-side perspectives; that female directors moderate the relationship between firm inherent situational factors (e.g. audit complexity and firm risk) and audit fees; and that the effect of audit committees’ gender diversity on audit fees varies with sub-national institutional contingencies.

scholarly journals Earnings management and managerial ownership in private firms

2018 ◽  
Vol 19 (4) ◽  
pp. 648-668 ◽  
Author(s):  
Steve O’Callaghan ◽  
John Ashton ◽  
Lynn Hodgkinson
Keyword(s):  
Earnings Management ◽  
Poor Performance ◽  
Policy Implications ◽  
Private Firms ◽  
Managerial Ownership ◽  
Cross Sectional ◽  
Data Set ◽  
Content Type ◽  
Management Behaviour ◽  
The Relationship

Purpose The purpose of this paper is to investigate two related questions. First, is earnings management behaviour in private firms related to managerial ownership and if so, what form does the relationship take. Second, is there evidence of opportunistic earnings management behaviour in private firms. Design/methodology/approach This study uses univariate and multivariate (regression) methodologies to examine the association between managerial ownership and earnings management in private firms. The study employs a data set of 1,223 large private UK firms. Findings Evidence is presented indicating opportunistic earnings management behaviour in private firms. Specifically, firms with low managerial ownership appear to engage in more earnings management when faced with poor performance. Further, when firms report income-increasing discretionary accruals, the magnitude of abnormal accruals varies non-linearly with managerial ownership. Research limitations/implications This study is limited by availability of data on sample firm ownership. This study uses cross-sectional data due to these limitations. Further research could investigate the relationships between earnings management and classes of shareholders other than managers in private firms. Practical implications Policy implications of this work suggest that non-managing shareholders in private firms face considerable agency costs, in particular where managerial ownership is very low or very high. Originality/value Pervasiveness of earnings management in private firms compared to public firms is well documented in the literature. There is limited extant research on the relationship between ownership structure and earnings management in private firms. The novel aspect of this study is to present findings on the association between this behaviour, managerial ownership and firm performance in private firms.

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