Please use this identifier to cite or link to this item: https://hdl.handle.net/1959.11/29037
Title: The Reciprocal Relationship between Earnings Management, Disclosure Quality and Board Independence: UK Evidence
Contributor(s): Katmon, Nooraisah (author); Farooque, Omar Al  (author)orcid 
Publication Date: 2019
Open Access: Yes
DOI: 10.5430/rwe.v10n5p63Open Access Link
Handle Link: https://hdl.handle.net/1959.11/29037
Abstract: We empirically examine the reciprocal relationships between disclosure quality, board independence and earnings management. Disclosure quality is measured using the IR Magazine Award, the number of forward looking information in the annual report as well as the analyst forecast accuracy. We estimate earnings management using modified Jones Model, while board independence is measured using the percentage of independent directors in the board. We remedied the simultaneity bias in our study using a simultaneous system of equation, which was estimated using two-stage least square regression (2SLS). Match-paired samples comprised of the winners and non-winners of the IR Magazine Award during the years from 2005-2008 were employed in our study. Our finding reported that there is a negative reciprocal relationship between disclosure quality and earnings management. We notice that these findings are robust across all disclosure quality measurement that we utilised in our 2 Stage Least Square (2SLS) regression. Only one way (negative) causality between board independence and earnings management is demonstrated (in the board independence equation). In regards to disclosure quality and board independence, we found mixed findings. In this instance, our result demonstrated that there is no reciprocal relationship between disclosure quality and board independence (measured using IRAWARD). Nonetheless, we reported a positive reciprocal relationship between board independence and disclosure quality when forward looking information is utilized as to represent disclosure quality and a negative relationship between these variables when analyst forecast accuracy is employed. Our finding suggests that future research should take into account the potential simultaneity bias when examining the relationship between disclosure quality, earnings management and board independence.
Publication Type: Journal Article
Source of Publication: Research in World Economy, 10(5), p. 63-80
Publisher: Sciedu Press
Place of Publication: Canada
ISSN: 1923-399X
1923-3981
Fields of Research (FoR) 2008: 150303 Corporate Governance and Stakeholder Engagement
150103 Financial Accounting
150101 Accounting Theory and Standards
Fields of Research (FoR) 2020: 350701 Corporate governance
350103 Financial accounting
350101 Accounting theory and standards
Socio-Economic Objective (SEO) 2008: 910402 Management
900201 Administration and Business Support Services
910103 Economic Growth
Socio-Economic Objective (SEO) 2020: 150203 Economic growth
150302 Management
110301 Administration and business support services
Peer Reviewed: Yes
HERDC Category Description: C1 Refereed Article in a Scholarly Journal
Appears in Collections:Journal Article
UNE Business School

Files in This Item:
2 files
File Description SizeFormat 
Show full item record

SCOPUSTM   
Citations

2
checked on Mar 9, 2024

Page view(s)

1,980
checked on Feb 25, 2024

Download(s)

4
checked on Feb 25, 2024
Google Media

Google ScholarTM

Check

Altmetric


Items in Research UNE are protected by copyright, with all rights reserved, unless otherwise indicated.