Does Corporate Governance Curb Managers’ Opportunistic Behavior of Exploiting Inside Information for Early Exercise of Executive Stock Options?

2016 ◽  
Vol 19 (01) ◽  
pp. 1650006 ◽  
Author(s):  
Chin-Chen Chien ◽  
Cheng-Few Lee ◽  
She Chih Chiu
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Stock Options ◽  
Executive Stock Options ◽  
Opportunistic Behavior ◽  
Governance Mechanisms ◽  
Inside Information ◽  
Early Exercise ◽  
Corporate Governance Mechanisms

This paper aims to investigate the role of corporate dividend policy and corporate governance in managerial timing decisions with regard to large exercise of executive stock options (ESOs). The findings indicate that the motivations behind managers’ decisions to exercise abnormally large ESOs vary depending on the strength of the related corporate governance mechanisms. Managers of weakly governed companies exploit abnormal earnings management when timing large exercises of ESOs. In contrast, managers of well-governed companies behave rationally in timing large exercises of ESOs, carrying them out in years in which their companies significantly raise dividend payouts.

scholarly journals Free Cash Flow And Earnings Management: The Moderating Role Of Governance And Ownership

2015 ◽  
Vol 32 (1) ◽  
pp. 255 ◽  
Author(s):  
Mehdi Nekhili ◽  
Ines Fakhfakh Ben Amar ◽  
Tawhid Chtioui ◽  
Faten Lakhal
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Cash Flow ◽  
Audit Committee ◽  
Management Practices ◽  
Audit Quality ◽  
Free Cash Flow ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms

<p class="Default">The purpose of this paper is to analyze the moderating effect of corporate governance and ownership features in lessening earnings management practices in a free cash flow (FCF) situation. A simultaneous equations model is developed to address endogeneity of the FCF variable. Based on a sample of French companies belonging to the SBF 120 index from 2001 to 2010, the results highlight the opportunistic behavior of managers in presence of free cash flows. Particularly, managers engage in earnings management practices that increase reported earnings. Our results also show that corporate governance mechanisms such as audit committee independence and external audit quality, in addition to institutional investors and managerial ownership reduce the extent of earnings management. Corporate governance mechanisms are substitutive in their monitoring role of managers’ behavior to reduce earnings management in presence of a free cash flow problem. </p>

scholarly journals Peran Mekanisme Corporate Governance sebagai Pemoderasi Praktik Earning Management terhadap Nilai Perusahaan

TRIKONOMIKA ◽  
2013 ◽  
Vol 12 (1) ◽  
pp. 49
Author(s):  
Mochammad Ridwan ◽  
Ardi Gunardi
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Firm Value ◽  
Institutional Ownership ◽  
Audit Committees ◽  
Managerial Ownership ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms

This study aims to determine how the effect of earnings management on firm value is moderated by the role of corporate governance mechanisms consisting of an outside independent director, institutional ownership , managerial ownership , audit committees , and the classification of public accounting firms ( KAP ) . In this study, the population of the entire company is listed on the Indonesia Stock Exchange totaling 111 companies , but only 103 of the 111 companies that companies used in this study . To find out how the effect of earnings management on firm value is moderated by the role of corporate governance mechanisms using Moderated Regression Analysis . The results prove that the earnings management significantly influence the value of the company . Institutional ownership , managerial ownership , and the classification of KAP is moderating variables influence earnings management relations while independent directors and audit committees is not a moderating variable.

scholarly journals Pengaruh Ukuran Perusahaan Dan Corporate Governance Terhadap Manajemen Laba Di Industri Perbankan Indonesia

2021 ◽  
Vol 9 (1) ◽  
pp. 111-120
Author(s):  
Karina Karina ◽  
Sutarti Sutarti
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Audit Committee ◽  
Banking Sector ◽  
Audit Quality ◽  
Stock Exchange ◽  
Governance Mechanisms ◽  
Audit Firm ◽  
Corporate Governance Mechanisms ◽  
Size Firm

The purpose of this research is to provide empirical evidence of the affect of ownership concetration, firms size, and corporate governance mechanisms on earnings management. Ownership concetration was measure by the biggest stock of individual or organization, firms size was measure by natural logaritma of net assets, and corporate governance mechanisms were measure by three variabels (composition of board of commisioner, audit quality were measure by industry specialize audit firm, and composition of audit committee). Earnings management was measure by discretionary accruals use Modified Jones Method. The population of this research is 41 companies in the banking sector which were listed in Indonesian Stock Exchange (IDX). The research data were collected from banking companies financial statement for the period of 2016 to 2018. Based on purposive sampling method. The reseacrh hypotesis were tested using multiple regression analysis. The results of this research show that firm size, firm of commissioner and proportion of commissioner have significant relationships with earnings management. Next, variables composition of board of commissioner, ownership concetration and specialize audit firm have no significant relationship with earnings management. Keywords: ownership concetration, firms size, corporate governance, earnings management

scholarly journals Are Corporate Governance Mechanisms, Corporate Strategy, and Corporate Financial Characteristics Related to Earnings Management?

2020 ◽  
Vol 5 (2) ◽  
pp. 48-57
Author(s):  
Clarissa Tonay ◽  
Paulina Sutrisno
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Cash Flow ◽  
Audit Committee ◽  
Corporate Strategy ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
Operating Cash Flow ◽  
Financial Characteristics ◽  
Company Growth

Objective – This study aims to examine the effect of corporate governance and several factors of corporate financial characteristics on earnings management. Corporate governance mechanisms such as an independent board, board size, and audit committee size are expected to be able to limit the ability of management to carry out earnings management. Meanwhile, a company's financial characteristics such as corporate strategy, company age, operating cash flow, company growth, profitability, company size and leverage are predicted to affect earnings management. Methodology/Technique – Many previous studies have involved the examination of corporate governance mechanisms and corporate financial characteristics of earnings management however, the results of those studies give rise to inconsistencies. Hence, this study seeks to re-examine the existence of corporate governance mechanisms and corporate financial characteristics of earnings management. The sample in this research is non-financial companies listed on the Indonesian Stock Exchange between 2016 and 2018. Findings – This data in this study is analysed using statistical methods such as multiple regression linear. The results of this study indicate that one mechanism of corporate governance, the size of the audit committee, has a positive effect on earnings management, while the financial characteristics of companies such as company size and operating cash flow negatively affect earnings management. Novelty – Other corporate financial characteristics such as corporate strategy, company age, operating cash flow, and profitability have a positive effect on earnings management. Meanwhile, the other variables such as board size, leverage, and company growth do not have an influence on earnings management. Type of Paper: Empirical. JEL Classification: G3, G34, G39. Keywords: Earnings Management; Corporate Strategy; Audit Committee Size; Company Age; Operating Cash Flows. Reference to this paper should be made as follows: Tonay, C; Sutrisno, P. 2020. Are Corporate Governance Mechanisms, Corporate Strategy, and Corporate Financial Characteristics Related to Earnings Management? J. Fin. Bank. Review, 5 (2): 48 – 57 https://doi.org/10.35609/jfbr.2020.5.2(2)

The impact of corporate governance mechanisms on earnings management in Islamic banks in the Middle East region

2016 ◽  
Vol 7 (4) ◽  
pp. 318-348 ◽  
Author(s):  
Hounaida Mersni ◽  
Hakim Ben Othman
Keyword(s):  
Corporate Governance ◽  
Middle East ◽  
Earnings Management ◽  
Audit Committee ◽  
Islamic Banks ◽  
Governance Mechanisms ◽  
Loan Loss ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
The Impact

Purpose The purpose of this paper is to examine whether corporate governance mechanisms affect the reporting of loan loss provisions by managers in Islamic banks in the Middle East region. Design/methodology/approach This empirical study uses balanced panel data from 20 Islamic banks, from seven Middle East countries for the period 2007 to 2011. The regression model is estimated using random effects specifications. Findings The empirical results show that discretionary loan loss provisions (DLLP) are negatively related to board size and the existence of an audit committee. Results also report a positive relationship between sharia board size and DLLP. This indicates that small sharia supervisory boards are more effective than larger ones, which could be due to the higher costs and negative effects of large groups on decision-making. Results also highlight that the existence of scholars with accounting knowledge sitting on the sharia board reduces discretionary behavior. Additional results provide evidence that an external sharia audit committee is also found to reduce discretion in Islamic banks. The conclusions are found to be robust to endogeneity issues and potentially omitted variables. Practical implications The findings are potentially useful for regulators and shareholders. Regulators could use the findings to focus on corporate governance mechanisms that restrain earnings management practices in Islamic banks and implement regulations to strengthen them. Additionally, this study gives shareholders further insight which enables them to better monitor the actions of managers and thus increase their control over their investments. Originality/value This study provides two contributions to the literature on Islamic banking. First, to the authors’ knowledge, this study is only the second piece of research focused on the impact of corporate governance on earnings management in Islamic banks. Second, the authors have examined the effect of some new corporate governance mechanisms that have not been studied previously in the research literature.

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