Board Independence, Audit Quality and Earnings Management: Evidence from Egypt

Mohamed Khalil and Aydin Ozkan

Journal of Emerging Market Finance, 2016, vol. 15, issue 1, 84-118

Abstract: Using a unique dataset for Egyptian firms, we investigate the relationship between board independence, audit quality and earnings management. We test whether firm-level corporate governance provisions matter in an emerging market setting characterised by weak legal enforcement and inadequate external discipline by the market for corporate control. Our results cast doubt on the notion that a higher ratio of non-executive members is associated with lower earnings management. We find that the effect of board independence on earnings management practices is contingent on the levels of ownership held by executive directors and large shareholders, as well as the composition of audit committee. In addition, the results are consistent with the view that high-quality auditors are effective in reducing earnings management. JEL Classification: M41, M48

Keywords: Earnings management; board independence; audit quality; corporate governance (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:15:y:2016:i:1:p:84-118

DOI: 10.1177/0972652715623701

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