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Exploring the Impact of Internal Corporate Governance on the Relation Between Disclosure Quality and Earnings Management in the UK Listed Companies

Journal of business ethics, 2017-05, Vol.142 (2), p.345-367 [Peer Reviewed Journal]

Springer Science+Business Media Dordrecht 2017 ;Springer Science+Business Media Dordrecht 2015 ;Journal of Business Ethics is a copyright of Springer, 2017. ;ISSN: 0167-4544 ;EISSN: 1573-0697 ;DOI: 10.1007/s10551-015-2752-8

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  • Title:
    Exploring the Impact of Internal Corporate Governance on the Relation Between Disclosure Quality and Earnings Management in the UK Listed Companies
  • Author: Katmon, Nooraisah ; Farooque, Omar Al
  • Subjects: Accuracy ; Audit committees ; Audits ; Business and Management ; Business Ethics ; Companies ; Corporate governance ; Disclosure ; Earnings ; Earnings management ; Education ; Ethics ; Governance ; Inadequate disclosure ; Interest groups ; Investors ; Management ; Philosophy ; Policy making ; Quality ; Quality of Life Research ; Studies
  • Is Part Of: Journal of business ethics, 2017-05, Vol.142 (2), p.345-367
  • Description: This study investigates the impact of internal corporate governance on the relation between disclosure quality and earnings management in the UK listed companies, in particular whether governance mechanisms have deterrent effect on earnings management similar to firms' disclosure quality. Unlike prior literature, we measure a number of board and audit committee-related governance instruments, three disclosure quality proxies (i.e. Investor Relation Magazine Award, Forward-Looking Disclosure and Analyst Forecast Accuracy) and the Modified Jones Model to test the hypotheses of the study on a matched-pair sample data of Investor Relation Magazine Award winning and non-winning firms. Our findings in the OLS and sensitivity analyses using Heckman Procedure and 2SLS regressions consistently report a significant negative association between earnings management and disclosure quality for all proxies in restraining earnings management. In contrast, corporate governance variables are mostly insignificantly related to earnings management. This provides an emerging trend of the outperformance of disclosure quality over internal governance mechanisms in lessening earnings management. These findings warrant due attention of the policy makers, investors, corporate firms and other stakeholders in shaping a high-quality disclosure and governance regime in corporate settings to mitigate managerial manipulations of earnings across the countries in the world.
  • Publisher: Dordrecht: Springer
  • Language: English
  • Identifier: ISSN: 0167-4544
    EISSN: 1573-0697
    DOI: 10.1007/s10551-015-2752-8
  • Source: ProQuest One Psychology
    AUTh Library subscriptions: ProQuest Central
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