文档介绍：Corporate governance and earnings management.
first draft, March 2000
Thomas Jeanjean
CEREG, University of Paris-Dauphine, France.
Key words: corporate governance, earnings management, independent directors.
Abstract: This article investigates the role of independent directors to monitor earnings management. Using a latent variable approach to assess earnings management, this article shows that external monitoring of the CEO (big six or five auditor, significant stockholder, percentage of independent board members) constraint the manager to engage in opportunistic e increasing decisions.
Introduction
Recent announcements (Chairman Lewitt of the SEC in 1998, the 1999 blue book of CC - the professional association of auditors in France), echoed by the financial press, cast a doubt on the reliability of financial statements. Corporate governance structures are frequently seen as a major device to guarantee the quality of financial statements. Those structures include auditor quality, ownership structure, capital structure, and board of director (size, existence of independent director(s), existence of mittees).
Previous studies show the influence of a high quality audit on earnings management (Becker et al., 1998; Francis, Maydew and Sparks, 1999): a quality auditor (.: a big auditor, DeAngelo, 1981) tends to reduce discretionary accruals.
The impact of ownership structure on earnings management is also well documented (Smith, 1976; Niehaus, 1993, Warfield, Wild and Wild, 1995): the presence of a major stockholder is associated with less e increasing accounting choices because the manager of a controlled business is more monitored than the CEO of a managerial firm.
Surprisingly, there are very few articles of the impact of board of directors on earnings management (henceforth, EM). Beasley (1996) and Dechow et al. (1996) compare the percentage of independent directors between firms that do violate GAAP to overstate their earnings and matched businesses th