Impact of Improved Corporate Governance and Regulations on Earnings Management Practices—Analysis of 7 Industries from the Indian National Stock Exchange

Jose Joy Thoppan, Robert Jeyakumar Nathan and Vijay Victor
Additional contact information
Jose Joy Thoppan: Saintgits Institute of Management, Kottayam, Kerala 686532, India
Robert Jeyakumar Nathan: Faculty of Business, Multimedia University, Melaka 75450, Malaysia
Vijay Victor: Department of Economics, CHRIST (Deemed to Be University), Hosur Road, Bangalore 560029, India

JRFM, 2021, vol. 14, issue 10, 1-15

Abstract: This study investigates discretionary earnings management practices, tracing the changes over the years in selected top performing and highly liquid listed Indian firms. It empirically measures the impact of corporate governance, financial legislation and global reporting standards on the firms’ earnings management practices. The study analyses a sample of 712 firm-year data comprising 89 listed Indian companies across 7 different sectoral indices of the National Stock Exchange of India (NSE) over 8 years (2011–2018). The Modified Jones model was used to compute Discretionary Accruals to measure Earnings Management based on data obtained using Bloomberg terminals. Statistical results and plots generated in Stata offer evidence that instances of earnings management have significantly reduced after the enactment of the Companies Act 2013 and the adoption of Indian Accounting standards which are converged with the IFRS. Findings suggest that services firms are engaging in relatively higher levels of earnings management compared to manufacturing firms. This study reveals the positive impact of improved corporate governance, regulation, and enforcement by significantly reducing the levels of earnings management among listed firms in India.

Keywords: accounting standards; financial sustainability; Companies Act 2013; corporate governance; discretionary accruals; investment sustainability; Modified Jones model (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/1911-8074/14/10/454/pdf (application/pdf)
https://www.mdpi.com/1911-8074/14/10/454/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:14:y:2021:i:10:p:454-:d:640497

Access Statistics for this article

JRFM is currently edited by Ms. Chelthy Cheng

More articles in JRFM from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().