Corporate Governance and Earnings Management: Evidence From Listed Firms at Palestine Exchange رسالة ماجستير

Abstract

The agency problem gives an incentive to present corporate governance codes that help to reduce the conflict of interest between company owners and the managers. This study uses the corporate governance indicators to assess the relationship between CG and earnings management. Managers uses earnings management to overstate or understate the figures to serve their own interest. Data were collected for the 33 sampled companies in this study from the annual reports of the listed companies at Palestine stock exchange. The modified cross sectional jones model was used to define the value of earnings management. The independent variable (CG indicators) were board independence, board size, ownership concentration, CEO duality and the audit quality. In addition to control variables to control for size and performance of the firm, these variables are company size, return on asset and leverage. By using the regression model a significant correlation between EM and size for the year 2015 and between EM and ownership concentration, size and return on asset for the year 2016 were found. The overall regression result shows that the model fits with the variable used. The R-squared (coefficient of determination) values shows that approximately 65% and 73% of the variability of earnings management is accounted for by the variables in the model.