scholarly journals Does Earnings Management Amplify The Association Between Corporate Governance And Firm Performance?: Evidence From Korea

2011 ◽  
Vol 10 (2) ◽  
Author(s):  
Sun-A Kang ◽  
Yong-Shik Kim
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Earnings Management ◽  
Stock Exchange ◽  
Causal Link ◽  
Governance System ◽  
Real Activity ◽  
Study Results ◽  
Corporate Governance System ◽  
And Performance

This paper aims to examine whether earnings management strengthens the causal links between corporate governance and firm performance. It examines the association between corporate governance and real activity-based earnings management and extends it to firm performance. This study involves 1,104 listings on the Korean Stock Exchange and finds that real activity-based earnings management decreases if firms have a well-established governance system, and such earnings management could strengthen the causal link between corporate governance and firm performance as measured by Tobin’s Q. Our study results are the first empirical evidences that real activity-based earnings management is effectively controlled by a corporate governance system and that it has links between corporate governance and performance. This provides the importance of corporate governance which could effectively constrain real activity-based earnings management, such that eventually influences the firm’s performance. In particular, it provides useful insights into corporate structures in which ownership is highly concentrated. Our findings are of great importance for Korea, in which the predominant business structure for large enterprises is that of the chaebol (equivalent to the Japanese keiretsu), which consists of conglomerates of many smaller companies and in which the structure of corporate governance is that of owner control.

scholarly journals Effect of Earnings Management on Firm Value with Corporate Governance as a Moderating Variable

2021 ◽  
Vol 9 (2) ◽  
pp. 262-268
Author(s):  
Jevri Afrizal ◽  
Rindu Rika Gamayuni ◽  
Usep Syaipudin
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Firm Value ◽  
Management Practices ◽  
Governance System ◽  
Corporate Governance System ◽  
And Performance ◽  
Conceptual Study ◽  
Positive Effect

This study aims to provide a conceptual study of the effect of earnings management on firm value by including corporate governance. as a moderating variable. This paper is a conceptual paper that discusses issues related to earnings management on firm value and the role of corporate governance in minimizing earnings management practices so as to increase firm value. Previous theoretical studies have shown that earnings management is effectively controlled by the corporate governance system and performance. In addition, the results of previous studies found empirical evidence that there is a positive relationship between earnings management and firm value. From the theoretical discussion and previous research, it is concluded that earnings management practices have a positive effect on firm value as moderated by corporate governance.

Value Relevance (VR), Earnings Management and Corporate Governance System

2016 ◽  
Vol 6 (2) ◽  
pp. 317
Author(s):  
Reza Dowlatabadi ◽  
Mahdi Filsaraei
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Stock Price ◽  
Negative Impact ◽  
Value Relevance ◽  
Stock Exchange ◽  
Information Source ◽  
Governance System ◽  
Financial Report ◽  
Corporate Governance System

Today, to make investment decisions, investors analyze the stock in the stock market and an information source used by them isthe financial report of the related firms. In some cases, the report may be prepared in accordance with management policies, which is known as an earnings management.Earnings management will affect intelligence value and consequently have negative impact. Due to these issues, in this study, the relationship between VRof earnings, earnings management and corporate governance is discussed. Using a sample of listed companies in Tehran Stock Exchange and the regression model, the results showed that the ownership of institutional investors has reduced the earnings management, but compared to major shareholders and company's audit by the National Audit Office, it has increased earnings management.The results also show that there is no significant relationship between management and the stock price as an indicator of measuring the VR of earnings.

Linking earnings management practices and corporate governance system with the firms’ financial performance

2017 ◽  
Vol 24 (2) ◽  
pp. 223-241 ◽  
Author(s):  
Prity Kumari ◽  
Jamini Kanta Pattanayak
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Earnings Management ◽  
Financial Performance ◽  
Commercial Banks ◽  
Management Practices ◽  
Global Financial Crisis ◽  
Governance System ◽  
Content Type ◽  
Corporate Governance System

Purpose In the shadow of global financial crisis, practice of earnings management can be hazardous for the growth and development of an economy, especially for a developing economy like India. This empirical study is performed to analyse the presence of earnings management practices in Indian public and private commercial banking industry. This study also aims at developing a framework for the three-way relationship existing between the variables of corporate governance, earnings management practices and firm performance. Design/methodology/approach Data have been collected for a period of 11 financial years (2003-2013) from Prowess (Centre for Monitoring Indian Economy) 4.14 database. A bank-based accrual model has been used for calculating earnings management practices. OLS regression has been used for analysing degree of interdependence among variables of corporate governance, earnings management practices and financial performance. Findings The analysis supports the fact that there is the existence of income increasing earnings management practices in Indian commercial banks. It is also observed that corporate government practices (viz. board characteristics, audit practices and performance-based remuneration) basically work as restricting variables for earnings management practices. It is evident from the analysis that market-based firm performance variables (viz. PE ratio, yield and profit after tax) are significantly related to earnings management and corporate governance system. Practical implications The finding of this study will help in monitoring and controlling fraudulent earnings management practices existing in Indian commercial banks. Originality/value This study is the initial research about the presence of earnings management practices in Indian commercial banks.

scholarly journals EFFECT OF CORPORATE GOVERNANCE ON REAL ACTIVITY-BASED EARNINGS MANAGEMENT: EVIDENCE FROM KOREA / ĮMONIŲ VALDYMO POVEIKIS, PAGRĮSTAS DARBO UŽMOKESČIO VALDYMU: KORĖJOS PAVYZDYS

2012 ◽  
Vol 13 (1) ◽  
pp. 29-52 ◽  
Author(s):  
Sun-A Kang ◽  
Yong-Shik Kim
Keyword(s):  
Corporate Governance ◽  
Data Analysis ◽  
Earnings Management ◽  
Stock Exchange ◽  
Investment Decision ◽  
Governance Structure ◽  
Corporate Governance Structure ◽  
Real Activity ◽  
Policy Makers ◽  
Reported Earnings

This paper aims to determine whether corporate governance affects manager's real operating or investment decision to control reported earnings. Through data analysis of firms listed on the Korean stock exchange, it was found that the aggregated measure of real activity-based earnings management decreases as the size of board is larger or as a greater proportion of external directors sit on the board. Those findings are almost the same, whether a corporate governance index composed by each BOD characteristics is employed, or problem caused by endogenous relationships among variables is controlled. The results provide the first empirical evidence that real activity-based earnings management is influenced by corporate governance structure. This focus on real activity-based earnings management suggests new avenues for research on corporate governance. The results offer some insights for policy makers interested in promoting legislation to ensure strong corporate governance in their nation. Santrauka Šiame straipsnyje siekiama nustatyti, kokią įtaką turi kompanijos vadovo sprendimai, susiję su gaunamų pajamų iš darbuotojų tiesioginės veiklos / operacijų ar investicinių sprendimų kontrole. Tyrime dalyvavo Korėjos kompanijos. Autorių atlikti tyrimai parodė, kad darbuotojų darbo užmokesčio valdymas yra efektyvesnis nei tiesioginė vadovo kontrolė. Straipsnyje minima, kad priėmus sprendimą valdyti darbo užmokesčius, būtina keisti visą įmonės valdymo struktūrą. Gauti rezultatai yra kaip siūlymas peržiūrėti atitinkamus nacionalinius teisės aktus Korėjoje.

scholarly journals The Wealth Effects Of Managerial Turnover: Implications For The Spanish Corporate Governance System

2011 ◽  
Vol 1 (10) ◽  
Author(s):  
Carlos Fernandez Mendez
Keyword(s):  
Corporate Governance ◽  
Negative Relationship ◽  
Wealth Effects ◽  
Governance System ◽  
Managerial Turnover ◽  
Study Results ◽  
Managerial Succession ◽  
Corporate Governance System ◽  
Institutional Shareholders ◽  
Positive Effect

Managerial succession decisions constitute crucial events for the company, as they can generate important organizational changes that affect the shareholders wealth, and at the same time, entail important conflicts of interests between the managers and the shareholders. Our study of the market reactions to managerial turnover announcements in the Spanish market, reveal that these decisions have a positive effect on the shareholders wealth. These wealth effects are especially intense in the case of outsider successions and when the company preturnover performance has been poor. These findings suggest that managerial turnover is a restructuring decision that is most welcome under conditions of low performance. These results are reinforced by the existence of a negative relationship between the turnover wealth effects and the firm's preturnover performance. Our results also have implications regarding the effectiveness of the Spanish corporate governance system, suggesting that the Board's outsiders and the institutional shareholders play a major monitoring role in the managerial succession processes. The Board outsiders and the institutional shareholders influence the succession process protecting the shareholders interests against particular professional interests of the managers. We have also found evidences of the existence of entrenchment effects linked to managerial stock ownership. Finally, consistently with our event study results, we have found evidences of a positive effect of outside succession on the market's reaction to managerial turnover, in the case of a poor presuccession performance context. We have obtained no evidence about any effect from outside succession in good performing companies or inside succession in any company independently of its previous performance.

Investigating the associations between executive compensation and firm performance

2018 ◽  
Vol 19 (2) ◽  
pp. 245-270 ◽  
Author(s):  
Nader Elsayed ◽  
Hany Elbardan
Keyword(s):  
Firm Performance ◽  
Executive Compensation ◽  
Stock Exchange ◽  
Performance Pay ◽  
Simultaneous Equation ◽  
Future Research ◽  
Content Type ◽  
Executive Remuneration ◽  
Study Results ◽  
And Performance

PurposeWhile there have been extensive empirical investigations of pay-performance sensitivity, the perspective of performance-pay has received less attention to date. While executive compensation is sensitive to firm performance, firm performance is also likely to be affected by executive compensation. Adopting multiple theoretical perspectives, the purpose of this paper is to examine whether executive compensation has a greater influence on firm performance or whether the latter has a greater influence on compensation.Design/methodology/approachUsing data from a five-year period (2010-2014) for Financial Times and Stock Exchange 350 companies, the authors employ a set of simultaneous equation modelling to jointly investigate, after accounting for endogeneity problem, the mutual association of executive compensation and firm performance by employing four control variables (board size, non-executive directors, leverage and boardroom ownership).FindingsThe authors find strong evidence for the greater influence of executive compensation on firm performance than the pay-performance framework. This finding supports the tournament theory compared with the agency perspective.Research limitations/implicationsInevitably, there are limitations in a wide-ranging study of this nature that could be addressed in future research. As any empirical study utilising company data, there may be concerns to the effect of survivorship bias and the manner in which companies have reorganised, if there is any, themselves during the period under examination. There are also issues as to missing data, some measures relating to both executive compensation and corporate governance are not provided by the BoardEx database.Practical implicationsThe study results provide evidence that using the tournament perspective by remuneration committees as a guide for determining executive compensation helps in achieving better performance. This helps in developing appropriate mechanisms for setting executive remuneration.Originality/valueThis paper combines an empirical investigation of the frameworks of pay-performance and performance-pay and develops a system of six simultaneous equations to examine the associations between executive compensation and firm performance.

scholarly journals The Role of Corporate Governance Mechanism in Optimizing Firm Performance: A Conceptual Model for Corporate Sector of Pakistan

2015 ◽  
Vol 5 (6) ◽  
pp. 109-115
Author(s):  
Ahsan Akbar
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Governance Structure ◽  
Governance Mechanism ◽  
Governance System ◽  
Corporate Governance Structure ◽  
Wealth Maximization ◽  
Corporate Governance System ◽  
Corporate Governance Mechanism

Corporate governance refers to the processes that govern and direct firm managers to take decisions that are in line with the shareholders goal of wealth maximization. Various studies have been conducted in developing countries including Pakistan to investigate the relationship between corporate governance and firm performance mostly by using the conventional measures of corporate governance. The result of these studies suggests that corporate governance positively and significantly contributes towards firm performance. The aim of this study is to incorporate some important policy measures related to major players of corporate governance that are of significant importance in establishing an effective corporate governance structure in addition to the conventional measures of corporate governance. Inclusion of these variables will help the firms to create an effective corporate governance system that will lead to an increased firm performance.

Sign in / Sign up

Export Citation Format

Share Document