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The Influence of Monitoring Mechanisms and Opportunistic Behaviors Toward Earnings Management

In: A New Paradigm for International Business

Author

Listed:
  • Aziani Idris

    (Universiti Teknologi Mara (UiTM) & Accounting Research Institute (ARI))

  • Zuraidah Mohd Sanusi

    (Accounting Research Institute (ARI) & Universiti Teknologi Mara (UiTM))

  • Mohd Taufik Mohd Suffian

    (Universiti Teknologi Mara (UiTM) & Accounting Research Institute (ARI))

Abstract

Corporate collapse which resulted from financial scandals keeps increasing in numbers. This study examines the influence of monitoring mechanisms and opportunistic behaviors toward earnings management (EM). Discretionary accrual is a proxy of EM in this study. Monitoring behaviors are proxied by two variables named leverage and dividend. Opportunistic behaviors are proxied by free cash flow (FCF) and profitability (ROA). 481 companies listed in Bursa Malaysia were collected, while another 401 public companies were collected from the Australian Stock Exchange. Several statistical analyses were carried out to examine the influence of monitoring mechanisms (leverage and dividend) and opportunistic behaviors (free cash flow and profitability) toward EM. The findings of this study revealed that only opportunistic behaviors have significant influence on EM in Malaysia. However, for Australia, the result indicated that only one determinant of monitoring mechanisms (dividend) has significant relationship with EM. The same goes to opportunistic behaviors, which indicated that only FCF has significant relationship with EM. For pool data countries, the result revealed that the hypotheses were also partially supported by both monitoring mechanisms and opportunistic behaviors toward EM.

Suggested Citation

  • Aziani Idris & Zuraidah Mohd Sanusi & Mohd Taufik Mohd Suffian, 2015. "The Influence of Monitoring Mechanisms and Opportunistic Behaviors Toward Earnings Management," Springer Proceedings in Business and Economics, in: Hadrian Geri Djajadikerta & Zhaoyong Zhang (ed.), A New Paradigm for International Business, edition 127, chapter 0, pages 247-269, Springer.
    • Handle: RePEc:spr:prbchp:978-981-287-499-3_13
    DOI: 10.1007/978-981-287-499-3_13
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