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Board independence tenure and real earnings management: accretive share buyback activities in Malaysia

Abdulsalam Alquhaif, Bakr Al-Gamrh, Rohaida Abdul Latif and Sitraselvi Chandren

International Journal of Business Governance and Ethics, 2021, vol. 15, issue 3, 266-284

Abstract: This study examines the impact of tenure in independent directors and audit committees on accretive share buybacks for real earnings management. Taking a sample of 601 non-financial firms listed on Bursa Malaysia from 2010 to 2015, we use a tobit model to test our hypotheses, where real earnings management is proxied by accretive share buyback. We find a significant effect of the tenure of outside directors on accretive share buyback. Firms with long-serving independent board directors are more likely to undertake real earnings management through accretive share buyback. Evidence is also found that firms with audit committees including long-serving members are more likely to engage in share buyback to maximise reported earnings per share (EPS) for earnings management. Finally, a high percentage of independent directors on audit committees restrain managers from utilising accretive share buyback to manage reported EPS.

Keywords: corporate governance; real earnings management; accretive share buyback; independent directors' tenure; audit committee; Malaysia; earnings per share; EPS; board tenure. (search for similar items in EconPapers)
Date: 2021
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