TITLE:
Effects of Board Characteristics on Accruals Earnings Management in the Wake of Financial Crisis
AUTHORS:
Christina Vadasi, Konstantinos Polyzos
KEYWORDS:
Earnings Management, Accruals, Corporate Governance, Board Characteristics, Financial Crisis
JOURNAL NAME:
Theoretical Economics Letters,
Vol.13 No.2,
March
10,
2023
ABSTRACT: This paper investigates the
association between corporate governance and earnings management. More specifically,
the effects of board characteristics on earnings management are examined. A proxy
of earnings management, namely discretionary accruals (Modified Jones Model, 1995)
is used to measure the level of earnings management. A sample of 103 firms listed
on the Athens Stock Exchange during the period 2015-2019 was employed. Using panel
data regressions, the authors explore the relationship between the discretionary
accruals and five board characteristics as identified in the literature (independence,
family directors, female directors, foreign directors, and CEO duality). The main
findings of the study suggested that earnings management is restricted in firms
with more independent directors and firms in which the same person takes the role
of the CEO and the chairman of the board. Empirical results also indicate that in
high performing firms earnings management is reduced while in firms with high levels
of debt the opposite appears to be the case. The findings of the study have implications
for many stakeholders such as regulators, managers,
shareholders, etc. This paper contributes to the academic debate on earnings
management by complementing the work of other researchers on the impact of corporate
governance on earnings management in the wake of a financial crisis.