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The Relationships between Corporate Governance Mechanisms, Earnings Management and Future Operating Performance: Evidence from Jordan
| المؤلف الرئيسي: | Al Haddad, Lara Mohammad (Author) |
|---|---|
| مؤلفين آخرين: | Makarem, Naser (Advisor) |
| التاريخ الميلادي: |
2017
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| موقع: | أبردين |
| الصفحات: | 1 - 271 |
| رقم MD: | 999189 |
| نوع المحتوى: | رسائل جامعية |
| اللغة: | الإنجليزية |
| الدرجة العلمية: | رسالة دكتوراه |
| الجامعة: | University of Aberdeen |
| الكلية: | Business School |
| الدولة: | بريطانيا |
| قواعد المعلومات: | +Dissertations |
| مواضيع: | |
| رابط المحتوى: |
الناشر لهذه المادة لم يسمح بإتاحتها. |
| المستخلص: |
The problem of earnings management has a significant literature and has been established as a major area of accounting research. However, the focus of the quality literature is heavily weighted to the developed or “one third” world. In examining a developing country in depth and seeking to adapt and develop the methodologies from the data-rich markets to a sparser environment, this thesis seeks to play a role in raising the profile of investigating financial behaviours and consequences across the majority of societies. In particular, this thesis aims to examine the impact of two influential internal corporate governance mechanisms, namely board characteristics and ownership structure, on the use of real activities-based and accrual-based earnings management by Jordanian firms. For the purpose of this study, three types of real earnings management are considered: sales manipulation, overproduction and abnormal reductions of discretionary expenditures, while for accruals management, the abnormal discretionary accrual is considered. For internal corporate governance mechanisms, board characteristics are examined using board independence, board size and CEO-duality, while ownership structure is examined using managerial ownership, institutional ownership, foreign ownership and largest shareholder ownership. Using panel data from Jordanian public firms over the period following the introduction of the Jordanian Corporate Governance Code (JCGC) in 2009, the empirical results reveal that corporate governance does influence companies’ decisions to manipulate reported earnings. In particular, both institutional ownership and managerial ownership are found to constrain the use of real and accrual earnings manipulations. In contrast, independent directors and largest shareholders are found to exaggerate the incidence of using both real and accrual-based earnings management and CEO-duality is found to exaggerate real-based earnings manipulations only. However, foreign ownership does not appear to have a significant impact on any of the two manipulation methods. In examining the trade-off between real and accrual earnings management it is further revealed that Jordanian firms use a combination of these two manipulation methods to obtain the greatest effect of earnings reporting strategies. To the best knowledge of the researcher, this study is the first in Jordan to examine the relationship between corporate governance mechanisms and both real and accrual-based earnings manipulations following the introduction of the 2009 JCGC, as well as the first to examine the relationship between board characteristics and real earnings management in Jordan and the Middle East region overall. Furthermore, this thesis examines the extent to which real earnings management is used to achieve certain earnings benchmarks, namely zero earnings or previous year’s earnings, and how this impacts on Jordanian firms' future operating performance. The empirical results reveal that Jordanian firms which just meet zero or last year’s earnings exhibit evidence of real activities manipulations. In addition, using the industry-adjusted cash flow from operations for the subsequent year as a proxy for future operating performance, the results show that Jordanian firms which use real earnings management to meet their earnings benchmarks experience superior subsequent operating performance, suggesting that earnings management through real activities manipulations is not totally opportunistic but also consistent with obtaining benefits leading to enhanced future operating performance. To the best knowledge of the researcher, this study is the first in Jordan and the Middle East region overall to have examined the extent to which the use of REM is associated with firms just meeting earnings benchmarks and the impact of REM intended to meet these earnings benchmarks on firms’ future operating performance. Thus, the findings of this study have significant policy implications for policymakers, regulators, audit professionals and investors seeking to impede earnings management practices and advance the financial reporting quality of Jordanian firms. |
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