The Effect of Corporate Governance Mechanisms on Earnings Management in Malaysian Manufacturing Companies

Murad Ali Ahmad Al-Zaqeba (), Abdul Hamid S (), Nehad Ibrahim Ineizeh (), Obada Jebreen Hussein () and Ala Hussein Albawwat ()

Asian Economic and Financial Review, 2022, vol. 12, issue 5, 354-367

Abstract: Earnings management (EM) firms produce less predictable accounting earnings that do not reflect the company's genuine financial success. However, EM is regarded as one of the most significant issues regarding financial reporting, especially in light of the COVID-19 pandemic. Nevertheless, this paper aims to investigate the effect of corporate governance mechanisms on earnings management in Malaysian manufacturing companies (MMCs). Data was collected from 2010 to 2019 for MMCs. By highlighting the updating of corporate governance rules, the market value and competitiveness of institutions will improve. Moreover, this paper provides evidence of the effect of corporate governance on earnings management. Therefore, the results may help policymakers to take a new approach to the development of corporate governance instructions, and stakeholders, which would enhance earnings quality and improve the quality of financial reports. This could help them build a more comprehensive picture of the firm and improve the decision-making process.

Keywords: Earnings management; Corporate governance mechanisms; Malaysian manufacturing companies; Corporate characteristics; Modified Jones model; Information asymmetry theory; Agency theory; Stakeholder theory and STATA. (search for similar items in EconPapers)
Date: 2022
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