Title: Audit committee independence and financial expertise and earnings management: evidence from China

Authors: Radwan Hussien Alkebsee; Gaoliang Tian; Alexandros Garefalakis; Andreas Koutoupis; Panagiotis Kyriakogkonas

Addresses: School of Management, Xi'an Jiaotong University, Xi'an, Shaanxi, China ' School of Management, Xi'an Jiaotong University, Xi'an, Shaanxi, China ' Department of Business Administration and Tourism, Hellenic Mediterranean University, Crete, Greece ' Department of Accounting and Finance, University of Thessaly, Larisa, Greece ' School of Business, University of the Aegean, Chios, Greece

Abstract: This paper investigates the effect of the audit committee's independence and financial expertise on financial reporting quality. In particular, we investigate the relationship between the audit committee's independence and financial expertise and accrual earnings management. Using a sample of Chinese public firms over the period of 2010 to 2017, the findings show a negative association between the independence of the audit committee and accrual earnings management. This finding suggests that a high proportion of independent directors on the audit committee enhance the monitoring role of the audit committee over earnings quality. We also, find no evidence regarding the effect of the audit committee's financial expertise on accrual earnings management. Our findings are robust to the potential endogeneity problem. This study has important implications for policymakers and other stakeholders.

Keywords: earnings management; audit committee independence; audit committee financial expertise; China.

DOI: 10.1504/IJBGE.2022.121928

International Journal of Business Governance and Ethics, 2022 Vol.16 No.2, pp.176 - 194

Received: 31 May 2020
Accepted: 22 Dec 2020

Published online: 07 Apr 2022 *

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