The Influence of Earnings Management and Board Characteristics on Company Efficiency

Hsueh-Li Huang, Lien-Wen Liang, Hai-Yen Chang and Hsiu-Yuan Hsu
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Hsueh-Li Huang: Department of Global Business, Chinese Culture University, Taipei 111396, Taiwan
Lien-Wen Liang: Department of Banking & Finance, Chinese Culture University, Taipei 111396, Taiwan
Hai-Yen Chang: Department of Banking & Finance, Chinese Culture University, Taipei 111396, Taiwan
Hsiu-Yuan Hsu: Pricewaterhouse Coopers Private Limited, Taipei 111396, Taiwan

Sustainability, 2021, vol. 13, issue 21, 1-18

Abstract: Earnings management is a means by which managers manipulate earnings to conceal the true performance of a company. The characteristics of the board of directors can also influence firm performance. This study applies data envelopment analysis (DEA) and the Tobin regression model to investigate the influence of earnings management and board characteristics on company efficiency. The data sample includes 396 Taiwanese electronics and biotechnology companies from 2009 to 2017. The results indicate that earnings management has an insignificant influence on company efficiency with mixed results on the interactions between earnings management and board characteristics. When companies practiced earnings management, director experiences, a higher proportion of female directors, and a higher number of board meetings increased company efficiency. In contrast, a higher number of independent directors and a higher attendance rate of the directors at the board meeting decreased company efficiency. The results of this study suggest that board diversity, more female directors, and meetings could still improve firm performance despite companies’ engagement in earnings management.

Keywords: earnings management; board characteristics; window dressing; company efficiency; firm performance (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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