The Comparison of Earnings Management Level and Study Impact of Corporate Governance on Earnings Management in the United States & United Kingdom
Article Sidebar
Main Article Content
Abstract
This study aimed to compare the level of earnings management resulting from different accounting standards and study board structure, composition, and meetings that affect the level of earnings management. The sample consisted of the companies that met the selection criteria, including 76 companies listed on the Nasdaq Stock Exchange and 76 companies listed on the London Stock Exchange. The instruments were descriptive statistics, multiple regression, and t-tests for independent samples. The financial data and other related data were collected from the DataStream database, company annual report, website, as well as books, textbooks, and other published documents. Data analysis used statistical software. The variables used in the study are independent variables consisting of the number of executive committee members, the proportion of outside directors on the executive committee, the number of executive committee meetings per year, and the top executive holding concurrent positions as the chairman of the board, the dependent variable was accrual-based earnings management, and the control variables included firm size, leverage ratio, sales growth, and return on total assets ratio. The results showed that 1) the level of accrual-based earnings management of the companies using US GAAP was lower than the companies using IFRS. 2) On the London Stock Exchange number of executive committee members had a negative impact; the proportion of outside directors on the executive committee had a positive impact on accrual-based earnings management, while on the Nasdaq Stock Exchange the proportion of outside directors on the executive committee and the top executive holding concurrent positions as the chairman of the board has a positive impact on accrual-based earnings management. The control variables that had an impact on accrual-based earnings management include firm size, sales growth, and return on total assets ratio.
Article Details
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
References
Abdou, H., Ellelly, N. N., Elamer, A. A., Hussainey, K. & Yazdifae, H. (2020). Corporate governance & earnings management nexus: Evidence from the UK & Egypt using neural networks. International Journal of Finance & Economics, 26(3),1-31. doi:10.1002/ijfe.2120
Agustia, D., Harymawan, I., Nasih, M. & Nowland, J. (2022). Joint board management meetings and earning management. Asian Review of Accounting, 30(4),540-558. doi:http//doi.org/10.1108/ARA-09-2021-0165
Al-Faryan, M. & A., S. (2024). Agency theory, corporate governance & corruption: an integrative literature review approach. Cogent Social Sciences,, 10(1),1-29. doi:http://doi.org/10.1080/23311886.2024. 2337893
Almaharmeh, M. I., Almasarwah, A. & Shehadeh, A. (2021). M&atory IFRS Adoption & Real/Accruals Bases Earnings Management in the UK. ACRN Journal of Finance & Risk Perspectives, 10(1),25-39.doi: http://doi.org/10.35944/jofrp.2021.10.1.002.
Barnard, C., I. (1938). The functions of the executive. Cambridge, MA: Harvard University press.
Bersa, A.(2021).The Relationship between Firm Performance, Earnings Management, and Executive Compensation of Thailand Listed Company (Unpublished master’s thesis). Prince of Songkla University, Songkla, Thailand.
Bubpha, P. (2020). An Influence of Role of Stakeholders in Asean CG Scorecard Disclosures on Environment Disclosures form Listed Companies in the Stock Exchange of Thailand on the Environmentally Sensitive Industries. Prince of Songkla University, Songkla, Thailand.
CFA Institute.(2022).US GAAP:Generally Accepted Accounting Principles.Retrieved March 2022, from www. cfainstitute.org/en/advocacy/issues/gaap#sort=%0pubbrowsedate%20descending
Dechow, P. M. & Schrand, C. M. (2004). Earnings Quality. USA: The Research Foundation of CFA Institute.
Dechow, P. M., Sloan, R. G. & Sweeney, A. P. (1995). Detecting Earnings Management. The Accounting Review, 70(2),193-225.
Deloitte. (2021). A roadmap to comparing IFRS Standards & U.S. GAAP: Bridging the differences. Retrieved February 2022, from www.deloitte.com/us/en/pages/audit/articles/us-aers-a-comparison-of-ifrs-Standards-&-us-gaap-bridging-the-differences.html
Dinuka, V. K. (2019). IFRS Adoption & Earnings Management Practice: Evidence from Indonesia Companies. Jurnal Akuntansi, Ekonomi dan Manajemen Bisnis, 7(2),229-239.
Eriotis, N., Kounadeas, T., Liapis, K. & Poutos, E. (2019). The Impact of IFRS Adoption by Greek Listed Companies on the Earnings Quality: An Empirical Investigation.International Journal of Finance, Insurance & Risk Management, 9(3-4),90-100.
FASB. (2021). About the FASB. Retrieved March 2022, from www.fasb.org/page/PageContent ?pageId=/about-us/about-fasb.html
FASB.(2022). Accounting Standards Updates Issued.Retrieved March 2022, from www.fasb.org/page/Page Content?pageId=/Standards/accounting-Standards-updates-issued.html
Freeman, R., E. (1984). Strategic Management: A Stakeholder Approach. USA : Pitman.
Hasan, M. T. & Rahman, A. A. (2020). The Role of Corporate Governance on the Relationship Between IFRS Adoption & Earnings Management: Evidence from Bangladesh. International Journal of Financial Research, 11(4),329-345, doi: http://doi.org/10.5430/ijfr.v11n4p329
Hattakit, V. & Tangan, K. (2022). The factors that influence of earnings management of listed companies on The Stock Exchange of Thailand, SET100 index group. Journal of Liberal Arts and Service Industry, 5(2),46-64.
Healy, P. M. & Wahlen, J. M. (1999). A Review of the Earnings Management Literature & Its Implications for Standard Setting. Accounting Horizons, 13(4),365-383.
IFRS. (2023). Who we are. Retrieved September, 2024 from www.ifrs.org/about-us/who-we-are/#about-us
Imhanzenobe, J. (2022). Value relevance and changes in accounting standard: A review of the IFRS adoption literature. Cogen Business & Management, 9(1),2039057, doi:10.1080/23319975.2022.2039057
Jasim, M., R. & Abdullah, B., N. (2019). Corporate Governance & real earnings management: International comparison. Retrieved May 2022, from www.researchgate.net/publication/338052085_Corporate _Governance_&_real_earnings_management_International_comparison
Jensen, M. C. & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs & Ownership Structure. Journal of Financial Economics, 3(4),305-360.
Kanjanakongka, A.(2021).Business development for sustainability.Retrieved July 2022, from https:// huexonline.com/knowledge/28/660/
Kjaerland, F., Haugdal, A. T., Sondergaard, A. & Vagslid, A.(2020).Corporate Governance & Earnings Management in a Nordic Perspective: Evidence from the Oslo Stock Exchange. Journal of Risk & Financial Management, 13(11),256. doi:10.3390/jrfm13110256
Liu, J., Harris, K. & Omar, N. (2020). Board Committees & Earnings Management. Corporate Board: Role, Duties & Composition, 9(1),6-17.
Mahajan, R., Lim, W., M., Sareen, M., Kumar, S. & Panwar, R. (2023). Stakeholder theory. Journal of Business Research, 166,114104, doi: http://doi.org/10.1016/j.jbusres.2023.114104
Majaski, C. (2024). Output Gap: What It Means, Pros & Cons of Using It, & Example. Retrieved September 2024, from https://www.investopedia.com/terms/o/outputgap.asp
Mellado, C. & Saona, P. (2020). Real earnings management & corporate governance: a study of Latin America. Economic Research, 33(1),2229-2268, doi: 10.1080/1331677X.2019.1691930
Nazarova, K., Mysiuk, V., Gordopolov, V., Koval, V. & Danileviciene, I. (2019). Preventional Audit: Implementation of SOX Control to Prevent Fraud.Business:Theory & Practice, 21(1),293-301, doi: http://doi.org/ 10.3846/btp.2020.11647
Nguyen, Q., Kim, M. H. & Ali, S. (2024). Corporate governance & earnings management: Evidence from Vietnamese listed firms. International Review of Economics & Finance, 89(PA),775-801, doi:http: //doi.org/10.1016/j.iref.2023.07.084
Rioui, S. E., Rigar, M. S. & Grine, A. (2020). The impact of mandatory IFRS adoption on earnings management: Evidence from Morocco: A multinomial logit approach. Journal of Physic: Conference Series, 1743 (1),012013. IOP Publishing. doi:10.1088/1742-6596/1743/1/012013
Sehrawat, N. K., Kumar, A., Lohia, N., Bansal, S. & Agarwal, T. (2019). Impact of Corporate Governance on Earnings Management: Large Sample Evidence from India. Asian Economic & Financial Review, 9(12), 1335-1345, doi: 10.18488/journal.aefr.2019.912.1335.1345
Sinlapates, P., Thirawutcharungchai, L. C. & Chancharat, N. (2020). Earnings Management Through Discretionary Accruals: Evidence from Rehabco Firms in The Stock Exchange of Thailand.NIDA Business Journal, 26,36-66.
The Securities and Exchange Commission. (2019). Code of Governance of the SEC (Code of Governance). Retrieved May 2022, from http://www.sec.or.th/TH/Documents/AboutUs/cgsec.pdf
Ua-anantrakool, K. (2020). Relationship between Earnings Management and Family Firm: A Study of Stock Exchange of Thailand (Agro, Consump & Indus Sector), (Unpublished master’s thesis). Mahidol University, Nakornpathom, Thailand.
Watts, R. L. & Zimmerman, J. L. (1986). Positive Accounting Theory. New Jersey : PrenticeHall. INC.
Wahyuningrum, I. F. S. & Rizqi, D. M. (2019). The Effect of IFRS Convergence toward Earnings Management with Managerial Ownership as a Moderating Variable. Jurnal Dinamika Akuntansi, 11(2),160-169, doi:http://dx.doi.org/10.15294/jda.v11i2.21468