The impact of corporate governance and accruals flexibility on the interaction between earnings management strategies

Bubaker Khaled and Zakaria Ali Aribi

International Journal of Accounting, Auditing and Performance Evaluation, 2021, vol. 17, issue 1/2, 127-147

Abstract: This study examines the impact of corporate governance mechanisms and accruals flexibility on the interaction between accruals earnings management (AEM) and real earnings management (REM) using a large sample of Indian firms for the period 2007-2015. The results show significant impact of board effectiveness, audit committee effectiveness, high auditor's quality and accruals flexibility on the level of AEM, and also we find significant relations between the level of REM and AEM, suggesting that managers may switch from AEM to REM when they find constraints on AEM. Additional analysis of firms with relatively strong earnings management incentives confirms the trade-off between AEM and REM. Our findings are also robust to the alternative measure of earnings management.

Keywords: AEM; accruals earnings management; REM; real earnings management; corporate governance mechanisms; India; accruals flexibility; board effectiveness; audit committee effectiveness. (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijaape:v:17:y:2021:i:1/2:p:127-147

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