Corporate Governance and Earnings Management. Evidence from Europe
In response to the many corporate scandals, regulators developed laws and recommendations in order to improve the governance of firms. This paper studies the relation between different corporate governance mechanisms and earnings management in a European context. Prior research focused mainly on U.S. firms. However, Europe is quite distinct from the U.S. in terms of country- and company-level characteristics. Our results show that better corporate governance is associated with less (income-increasing) earnings management by European firms. More specifically, we find that better shareholder rights, fewer anti- takeover mechanisms, and a good functioning board of directors and director committees lead to higher accounting quality. We also find that the extent of corporate governance recommendations issued at the country level influences the effectiveness of corporate governance practices in constraining earnings management. These relations are especially evident in code law countries, where the opportunities for earnings management are larger than in common law countries.
Volume (Year): LIII (2008)
Issue (Month): 3 ()
|Contact details of provider:|| Postal: |
Web page: http://www.econ.kuleuven.be
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ete:revbec:20080303. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Hilde Roos)The email address of this maintainer does not seem to be valid anymore. Please ask Hilde Roos to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.