| Pub. Date | : Jan, 2024 |
|---|---|
| Product Name | : The IUP Journal of Corporate Governance |
| Product Type | : Article |
| Product Code | : IJCG020124 |
| Author Name | : Jayasree Mangalagiri, Parvathi Vali and Chandrabhanu Das |
| Availability | : YES |
| Subject/Domain | : Management |
| Download Format | : PDF Format |
| No. of Pages | : 16 |
Earnings management has always been an area of interest to researchers. Though several studies have highlighted the factors affecting earnings management, this study uses the Beneish M score as dependent dummy variable to understand the effect of corporate governance on earnings management after the amendment of the Indian Companies Act, 2013. The study uses probit regression, and the results show that board independence has a negative and significant effect, and board size has a positive and significant influence on earnings management. The study highlights the importance of corporate governance in minimizing earnings management practices.
Financial statements are perceived to be authentic information for investors in the capital market for making economic decisions. Fraud is costly and detrimental to all stakeholders. It impairs the credibility of accountants and public faith in the organization. The infamous accounting scandals in companies like Enron, WorldCom, and Global Crossing have diminished investor confidence. The most frequent financial fraud occurs when companies distort the quality of financial statements, affecting investor confidence (Herawati, 2015; and Rostami and Rezai, 2022). Financial fraud is an ethical concern regarding shareholder rights and investor faith. Several studies have linked corporate governance to financial fraud (Razali and Arshad, 2014; Habib and Ziang, 2015; Ndofor et al., 2015; and Zadeh et al., 2018).