Title: The impact of corporate governance and accruals flexibility on the interaction between earnings management strategies

Authors: Bubaker Khaled; Zakaria Ali Aribi

Addresses: Faculty of Economics, University of Benghazi, Benghazi, Libya ' Lancashire School of Business and Enterprise, University of Central Lancashire, Preston, PR1 2HE, UK

Abstract: This study examines the impact of corporate governance mechanisms and accruals flexibility on the interaction between accruals earnings management (AEM) and real earnings management (REM) using a large sample of Indian firms for the period 2007-2015. The results show significant impact of board effectiveness, audit committee effectiveness, high auditor's quality and accruals flexibility on the level of AEM, and also we find significant relations between the level of REM and AEM, suggesting that managers may switch from AEM to REM when they find constraints on AEM. Additional analysis of firms with relatively strong earnings management incentives confirms the trade-off between AEM and REM. Our findings are also robust to the alternative measure of earnings management.

Keywords: AEM; accruals earnings management; REM; real earnings management; corporate governance mechanisms; India; accruals flexibility; board effectiveness; audit committee effectiveness.

DOI: 10.1504/IJAAPE.2021.117580

International Journal of Accounting, Auditing and Performance Evaluation, 2021 Vol.17 No.1/2, pp.127 - 147

Accepted: 02 Apr 2020
Published online: 14 Sep 2021 *

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