scholarly journals Earnings management, corporate governance, and ownership structure of Philippine initial public offerings

2021 ◽  
Vol 18 (4) ◽  
pp. 175-191
Author(s):  
Angelo O. Burdeos

Prior studies examined the effect of corporate governance variables on discretionary current accrual, the most widely used measurement of earnings management. The principal-agent conflict implies that the size of the board, the percent of independent directors, CEO duality, and auditor prestige limit discretionary current accruals (DCA). This paper extends past studies by examining the effect of ownership structure on discretionary current accruals. The study determines the level of income-increasing earnings management of initial public offerings (IPOs) in the Philippines and the factors that explain it. Particularly, the paper examines the effect of ownership concentration and largest shareholder ownership on discretionary current accruals. The study uses a final sample of 105 IPO firms in Philippine Stock Exchange (PSE) from 2008 to 2018. Employing the modified Jones’s (1991) model to measure discretionary current accrual and multiple regression analysis, the study finds -4.19% discretionary current accrual on the average. It also reveals that the 2002 Philippine Code of Corporate Governance (PCCG) is ineffective in curbing earnings management. In addition, there is an insignificant relationship between the size of the board, CEO duality, ownership concentration, largest shareholder ownership and auditor prestige, and earnings management. Furthermore, the paper finds a significant relationship between the percent of independent directors, industry sector, return on assets (ROA) and cash flow from operations and earnings management.

Author(s):  
Ramzi Benkraiem

<p class="MsoNormal" style="text-align: justify; margin: 0in 38.3pt 0pt 0.5in;"><span style="font-size: 10pt; mso-ansi-language: EN-US;"><span style="font-family: Times New Roman;">Recent debates about the functioning of boards of directors have focused on the disciplinary role of independent directors (ID). Evaluating the effectiveness of this role is an interesting empirical question. This study seeks to examine the influence of these directors and two other corporate governance mechanisms<span style="color: black;">, namely the audit quality and the ownership structure, on earnings management as measured by working capital discretionary accruals (WCDAC). The analysis, conducted over a period of 4 years from 2001 to 2004, is based on a sample of 239 different French companies listed on the Paris stock exchange. </span>The findings show that the presence of ID can moderate the management of WCDAC. This role appears to be more effective <span style="color: black;">when these ID make up at least one third of the members of boards of directors, as recommended by the Vi&eacute;not 1999 report. The Big 4 auditors can also limit this discretionary adjustment. However, no statistically significant relationship was observed between dispersion vs. concentration of ownership structure and WCDAC. This study adds to the limited research into the relationship between corporate governance and earnings management in France. It also gives empirical evidence on the effectiveness of the Vi&eacute;not 1999 report&rsquo;s recommendations. Thus, it should be of interest to academics as well as regulators in preparing and amending corporate governance laws.</span></span></span></p>


Author(s):  
Fivi Anggraini

Earnings management is the moral hazard problem of manager that adses because of the conflict of interest between the manager as agent and the stakeholder and the owner as principal. The behavior of earnings management will immediately influence the reported earning. The aims of this research at examining the relationship of board and audit committe to earnings management. The samples of this research is all of companies member Corporate Governance Perception Index (CGPI) in the years of 2003-2006 which were listed in Jakarta Stock Exchange. The results of this study show that (1) the proportion of independent directors on the board had not significant relationship to earning management, (2) competence of independent directors on the board had not significant relationship to earning management, (3) the size of board had significant relationship to earning management, (4) the proportion of independent directors on the audit committe had not significant relationship to earning management, and (5) competence of members of the audit committe had significant relationship to earning management.


2018 ◽  
Vol 2 (1) ◽  
pp. 34-42 ◽  
Author(s):  
SMRK Samarakoon ◽  
KLW Perera

The short-run price performance of Initial Public Offerings (IPOs) indicates that the prices are often underpriced which is widely documented as a universal phenomenon. Corporate governance refers to the set of systems, principles and processes by which a company is governed. Establishing good corporate governance system in an IPO company makes good decisions which attract more outside investors. Therefore, this study examines whether there is any impact of corporate governance practices on short-run price performance of Sri Lankan IPOs. Study examined 44 fixed price IPOs which were listed on the Colombo Stock Exchange (CSE) during the period of 2003 – January to 2015- December. The study found that Sri Lankan IPOs underprice by 30% on AR, which is statistically significant at 5% level. Further, it found that block holder ownership (ownership concentration), CEO duality and existence of the non-executive directors in the board are positively related to the short-run underpricing, which are statistically significant at 5%. But, the board size has a significant negative impact on underpricing. These relationships are in line with the international literature which confirms that the corporate governance practices have significant impact on short-run price performance of IPOs in Sri Lanka. These findings also support the agency and signaling theories.


2014 ◽  
Vol 12 (1) ◽  
pp. 352-362
Author(s):  
Lalith P. Samarakoon ◽  
Palani-Rajan Kadapakkam

We study the relation between initial IPO underpricing and two-tier board structure in the Vienna Stock Exchange of Austria, where a two-tier board is mandatory for listed companies. The board ratio, defined as the size of the supervisory board to the management board, is used to capture the effect of two-tiered board on underpricing. The results show that the board ratio is negatively related with underpricing, consistent with the agency theory which predicts that more effective monitoring implied in a relatively larger supervisory board will lead to lower agency costs, and thus lower underpricing. The results are robust to the inclusion of control variables and suggest that firms seeking to raise external capital will be helped by adopting strong corporate governance standards.


2019 ◽  
Vol 19 (3) ◽  
pp. 508-551 ◽  
Author(s):  
Alessandro Merendino ◽  
Rob Melville

PurposeThis study aims to reconcile some of the conflicting results in prior studies of the board structure–firm performance relationship and to evaluate the effectiveness and applicability of agency theory in the specific context of Italian corporate governance practice.Design/methodology/approachThis research applies a dynamic generalised method of moments on a sample of Italian listed companies over the period 2003-2015. Proxies for corporate governance mechanisms are the board size, the level of board independence, ownership structure, shareholder agreements and CEO–chairman leadership.FindingsWhile directors elected by minority shareholders are not able to impact performance, independent directors do have a non-linear effect on performance. Board size has a positive effect on firm performance for lower levels of board size. Ownership structure per se and shareholder agreements do not affect firm performance.Research limitations/implicationsThis paper contributes to the literature on agency theory by reconciling some of the conflicting results inherent in the board structure–performance relationship. Firm performance is not necessarily improved by having a high number of independent directors on the board. Ownership structure and composition do not affect firm performance; therefore, greater monitoring provided by concentrated ownership does not necessarily lead to stronger firm performance.Practical implicationsThis paper suggests that Italian corporate governance law should improve the rules and effectiveness of minority directors by analysing whether they are able to impede the main shareholders to expropriate private benefits on the expenses of the minority. The legislator should not impose any restrictive regulations with regard to CEO duality, as the influence of CEO duality on performance may vary with respect to the unique characteristics of each company.Originality/valueThe results enrich the understanding of the applicability of agency theory in listed companies, especially in Italy. Additionally, this paper provides a comprehensive synthesis of research evidence of agency theory studies.


Author(s):  
Yousef Alrayyes ◽  
Nahed Al Khaldy

The aim of the study is to analyze the impact of corporate governance rules on earnings management for companies listed on Palestine Exchange. A number of corporate governance variables was selected to achieve this aim, including size of board of directors, CEO duality, board of director’s independence, property rights, number of board directors’ meetings. Modified Jones Model has been used to detect earnings management. Panel Data Model has also been involved in the study, where the population study consists of the 48 companies listed on Palestine Exchange, and which are distributed across five main sectors. The study sample included 13 industrial and services companies listed on Palestine Exchange. This study found that there was a negative influence between board size and CEO duality, and between earnings management. The study also showed that there is a positive influence between board independence and earnings management. Moreover, it showed that no relationship between board directors meetings and internal ownership with earnings management. The study stressed on the need for continued reinforcement of the governance rules, in order to avoid the negative impacts resulted from failure to apply these rules, taking into consideration the support of board independence in their relationship with areas of executive work to avoid taking decision that may affect earnings management. It also recommended that doing other researches on the same subject should be continued, taking into account the examination of variables other than those in this study to get to the variables that have the greatest impact on earnings management for companies listed on Palestine Exchange. 


2021 ◽  
Vol 18 (3) ◽  
pp. 27-39
Author(s):  
Andreas ◽  
Enni Savitri ◽  
Tatang Ary Gumanti ◽  
Nurhayati

Earnings management (EM) refers to the common use of accounting techniques in various economic settings, such as Initial Public Offerings (IPOs), to produce financial statements. This study, therefore, analyzes the effect of firm size, operating cash flow, the used IPO proceeds, earnings changes, and leverage on EM of manufacturing companies on the Indonesia Stock Exchange from 1989 to 2013. This sector comprises the essential chemical industry, miscellaneous organizations, and consumer goods, with 63 firms being used to meet the selection criteria. The regression analysis showed that the intended use of funds and leverage had a negative and significant impact on EM. Furthermore, the process is measured using Friedlan’s (1994) Discretionary Current Accruals model with similar results found in each industry group and their insignificant differences used to regulate the level of discretionary accruals between the three sectors. This study implies that the EM level is qualitatively similar among IPO companies in the three sub-sectors examined. AcknowledgmentsThe authors are grateful to the audience for their comments during the 11th Environmental and Sustainability Management Accounting Network-Asia Pacific (EMAN-AP) Conference held at the Danang University of Economics, Danang, Vietnam, 12-13 August 2019. The early draft was titled “Earnings Management and Initial Public Offerings on Manufacturing Sectors Companies”.


2006 ◽  
Vol 2 (2) ◽  
pp. 67
Author(s):  
Elisa Indah ◽  
Erny Ekawati

The previous research fotmd empirical evidence about existence of earnings monagement of suuraunding IPO (Initial Public Offerings). Previous reseqrch also found that operating performance at period after IPO less than before IPO. The purposes of this research is to reexamine earnings management surrounding IPO and association earnings manog"*"it surrotmding IPO with the operating performance in Indonesiancapital market.This study uses the companies data conducting IPO on 88 /irms that went at Jakarta Stock Exchange for the periods 1995-2002. Company do not the included in industrial group of property, real estate and building construction, and industrial group of finance. The method used toexamine eantings management are the method that develop by DeAngelo.Ihe result of this study by using t-test is fomd that firms manage theiremnings to increqse reported income before IPO and after IPO. It meansthat IPO issuers make income increasing discretionary accruals in thefmancial statement before IPO and in the financial statement afier IPO.In this study by using double regression examination also found thatoperoting performance after IPO less than before IPO. This conditionis consequence firms conduct earnings managetnent before IPO untilhappen underperformance after IPO.Keywords z IPO, earnings management, income increasing discretionaryaccruals, operating performance, DeAngelo model.


2019 ◽  
Vol 12 (1) ◽  
pp. 1-18
Author(s):  
Surya Bahadur G. C. ◽  
Ravindra Prasad Baral

The paper attempts to analyze relationships among corporate governance, ownership structure and firm performance in Nepal. The study comprises of panel data set of 25 firms listed at Nepal Stock Exchange (NEPSE) covering a period of five years from 2012 to 2016. The econometric methodology for the study consists primarily of least squares dummy variable (LSDV) model, fixed and random effects panel data models and two-stage least squares (2SLS) model. The study finds bi-directional relationship between corporate governance and performance. Among corporate governance internal mechanisms; smaller board size, higher proportion of independent directors, reducing ownership concentration, improving standards of transparency and disclosure, and designing appropriate director compensation package are important dimensions that listed firms and regulators in Nepal should focus on. Ownership concentration is found to have positive effect on performance; however, it affects corporate governance negatively. This study raises understanding and provides empirical evidence for endogenous relationship between corporate governance and performance and offers support for principal-principal agency relationship. The results of this study lead to several practical implications for listed firms as well as policymakers of Nepal in promoting sound corporate governance practices and codes. For listed companies, the improvement in compliance with a code of corporate governance or voluntary adoption of best practices can provide a means of achieving improved performance.


2020 ◽  
pp. 097226292095342
Author(s):  
Cynthia P. Cudia ◽  
Aeson L. Dela Cruz ◽  
Madeleine B. Estabillo

Two types of earnings management (EM), opportunistic and efficient motive, were presented in the literature. This article aimed to investigate the type of EM employed by publicly listed property sector firms in the Philippines. Furthermore, the study also examined the effect of firm characteristics and corporate governance practices on firm’s level of EM using discretionary accruals. In conducting this study, panel data econometric technique, particularly the ordinary least squares was used to determine which among the firm-specific characteristics (profitability, leverage, cash flows from operations and firm size) or corporate governance mechanisms (CEO duality, board size, board independence and audit quality) significantly influence publicly listed property sector firms’ EM activities using discretionary accruals. Results show that these firms employ efficient type of EM. Also, cash flows from operations, firm size and CEO duality are statistically significant predictors of EM for property firms. Except for cash flows from operations, these results contradict with prior studies when the same model was subjected for industrial firms. Such similarities and differences from previous studies warrant for further analysis on the peculiarities and intrinsic characteristics of the industrial and property sector in the Philippines. Such will point to certain policy frameworks in enabling EM to be harnessed in satisfying the firms’ bottom lines.


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