Financial Performance of Banking Industry of Pakistan: The Role of Corporate Governance Index and Earnings Management Practices

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.

Download Full-text

Corporate Governance, Earnings Management dan Kinerja Perbankan di Indonesia

Jurnal Manajemen Bisnis ◽

10.38043/jmb.v16i1.2020 ◽

2019 ◽

Vol 16 (1) ◽

pp. 68

Author(s):

Made Ratih Baskaraningrum ◽

Agus Fredy Maradona

Keyword(s):

Corporate Governance ◽

Earnings Management ◽

Audit Committee ◽

Management Practices ◽

Banking Industry ◽

Stock Exchange ◽

Institutional Ownership ◽

Audit Committees ◽

Managerial Ownership ◽

Good Corporate Governance

ABSTRACT The purpose of this research is to investigate the concept of the importance of the role of good corporate governance in the banking industry in Indonesia. Specifically, this study intends to examine whether good corporate governance plays a role in improving company performance, especially by limiting earnings management practices. This study focuses on banking companies in Indonesia that are listed on the Indonesia Stock Exchange (IDX). Determination of company samples in this study was carried out by purposive sampling method, with the criteria of banking companies listed on the Indonesia Stock Exchange during the 2014-2016 period. The data collection method used in this study was the method of documentation study. The data analysis method used is Path Analysis.The results of the Square Multiple Correlation for earnings management amounted to 0.795 and banking performance was 0.860, so for earnings management variables influenced by managerial ownership, institutional ownership, the size of the independent board of commissioners, the audit committee amounted to 79.5%. While banking performance variables are influenced by managerial ownership, institutional ownership, board of commissioners size, the proportion of independent commissioners, audit committees and earnings management is 86%. Empirical benefits in research are about the application of corporate governance, earnings management and financial performance in the banking industry in Indonesia. The practical benefits in this study can provide benefits for companies in the application of appropriate corporate governance and benefits for investors who invest their capital in the company and can also be taken into consideration for companies to reduce profit management in the company so as to improve banking performance in Indonesia.

Download Full-text

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

Corporate Governance ◽

10.1108/cg-05-2018-0183 ◽

2019 ◽

Vol 19 (6) ◽

pp. 1167-1186 ◽

Cited By ~ 6

Author(s):

Lara Al-Haddad ◽

Mark Whittington

Keyword(s):

Corporate Governance ◽

Earnings Management ◽

Financial Reporting ◽

Management Practices ◽

Reporting Quality ◽

Content Type ◽

Public Firms ◽

Corporate Governance Mechanisms ◽

The Impact

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.

Download Full-text

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

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v32i1.9536 ◽

2015 ◽

Vol 32 (1) ◽

pp. 255 ◽

Cited By ~ 6

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>

Download Full-text

The Role of Corporate Governance in Mitigating Earnings Management Practices

Corporate Governance and Its Implications on Accounting and Finance - Advances in Finance, Accounting, and Economics ◽

10.4018/978-1-7998-4852-3.ch003 ◽

2021 ◽

pp. 59-84

Author(s):

Nagat Mohamed Marie Younis

Keyword(s):

Corporate Governance ◽

Earnings Management ◽

Agency Theory ◽

Management Practices ◽

Theoretical Framework ◽

Relevant Research ◽

Objective Reference ◽

The Relationship

The aim of the research is to clarify the role and importance of corporate governance (CG) mechanisms in mitigating earnings management (EM) practices. To achieve this objective, reference was made to previous studies and relevant research. An analysis was mentioned in accounting about the relationship between agency theory and earnings management clarifying the theoretical framework for earnings management from where the concept, motives, techniques of earnings management, methods of disclosure of earnings management, the risks resulting from earnings management, as well as know corporate governance, in terms of concept, goals, importance, principles, characteristics, and mechanisms of corporate governance, and finally, the role of corporate governance in limiting earnings management practices.

Download Full-text

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

Journal of Financial Crime ◽

10.1108/jfc-03-2016-0020 ◽

2017 ◽

Vol 24 (2) ◽

pp. 223-241 ◽

Cited By ~ 6

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.

Download Full-text

Does Corporate Social Responsibility Reduce Earnings Management? The Moderating Role of Corporate Governance and Ownership

Management international ◽

10.7202/1060030ar ◽

2019 ◽

Vol 23 (2) ◽

pp. 45-55 ◽

Cited By ~ 1

Author(s):

Aymen Ajina ◽

Faten Lakhal ◽

Sabrine Ayed

Keyword(s):

Corporate Governance ◽

Corporate Social Responsibility ◽

Social Responsibility ◽

Earnings Management ◽

Ownership Structure ◽

Management Practices ◽

Corporate Social ◽

The Relationship ◽

Moderating Role

The purpose of this paper is to investigate the relationship between corporate social responsibility and earnings management and the moderating effect of corporate governance and ownership structure on this relationship. Using panel data for a sample of French listed companies between 2010 and 2013, we find that CSR engagementconstrain earnings management practices suggesting that managers would comply with the ethical requirements and satisfy stakeholders’ interests. The results also show that the effect of CSR on earnings management is particularly stronger in more independent boards and with high institutional ownership structure. These corporate governance devices help mitigating managerial opportunistic behavior.

Download Full-text