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Audit committee features and earnings management: further evidence from Singapore

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  • J-L.W. Mitchell Van Der Zahn
  • Greg Tower

Abstract

In this paper, we investigate the link between audit committees and earnings management providing a more comprehensive simultaneous analysis of the influence of audit committee features using a sample of 485 firm-years from Singapore's publicly traded firms during the 2000–2001 calendar period. Empirical findings indicate firms with a higher proportion of independent audit committee members are more effective at constraining earnings management. Firms with audit committees that are more diligent and/or lack the presence of independent directors serving simultaneously on a substantial number of boards and committees are more effective at constraining earnings management. These findings are robust to alternative income-incentives facing corporate management. Overall, our findings have implications for stakeholders, regulators, and corporate governance. For example, our findings infer policymakers may need to focus on other audit committee characteristics to strengthen the committee's ability to constrain earnings management rather than continue the present fixation with independence.

Suggested Citation

  • J-L.W. Mitchell Van Der Zahn & Greg Tower, 2004. "Audit committee features and earnings management: further evidence from Singapore," International Journal of Business Governance and Ethics, Inderscience Enterprises Ltd, vol. 1(2/3), pages 233-258.
    • Handle: RePEc:ids:ijbget:v:1:y:2004:i:2/3:p:233-258
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    Citations

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    Cited by:

    1. Nadiah Amirah Nor Azhari & Suhaily Hasnan & Zuraidah Mohd Sanusi, 2020. "The Relationships Between Managerial Overconfidence, Audit Committee, CEO Duality and Audit Quality and Accounting Misstatements," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(3), pages 18-30, June.
    2. Abernathy, John L. & Beyer, Brooke & Masli, Adi & Stefaniak, Chad, 2014. "The association between characteristics of audit committee accounting experts, audit committee chairs, and financial reporting timeliness," Advances in accounting, Elsevier, vol. 30(2), pages 283-297.
    3. Ibadin L. Ayemere Ph.D & Afensimi Elijah, 2015. "Audit Committee Attributes and Earnings Management: Evidence from Nigeria," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 5(4), pages 14-23, April.
    4. Benjamin T. Albersmann & Daniela Hohenfels, 2017. "Audit Committees and Earnings Management – Evidence from the German Two-Tier Board System," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 18(2), pages 147-178, May.
    5. Bilal, & Chen, Songsheng & Komal, Bushra, 2018. "Audit committee financial expertise and earnings quality: A meta-analysis," Journal of Business Research, Elsevier, vol. 84(C), pages 253-270.
    6. Ibadin L. Ayemere Ph.D & Afensimi Elijah, 2015. "Audit Committee Attributes and Earnings Management: Evidence from Nigeria," International Journal of Business and Social Research, LAR Center Press, vol. 5(4), pages 14-23, April.

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