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Lookup NU author(s): Dr Aly SalamaORCiD
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Research Question/Issue: The aim of this paper is to analyze the impact of corporate governance on earnings management in China. It focuses on two aspects from the perspective of board monitoring: the role of independent directors on the board and the supervisory directors in constraining earnings manipulation. This paper examines whether the independence, financial/accounting expertise and official background and a higher proportion of independent directors and supervisors are related to the absolute value of discretionary accruals or discretionary revenue. Research Findings/Insights: By conducting the research on a large sample of Chinese listed companies from 2005 to 2010, the empirical results suggest that Chinese two-tier board structure comprising aboard of directors with at least one third independent directors and supervisory board fails to mitigate earnings management. Theoretical Implications: This study adds to the corporate governance literature by linking the independent directors and supervisory directors and earnings management. It shows that the principal-principal agency conflict between the controlling shareholders (the State) and minority shareholders is the main cause of earnings management in China. Practical Implications: The results support the evidence that the regulators should pay more attention to enhance the authentic independence of independent directors and supervisory directors in Chinese firms.
Author(s): Habbash M, Xiao L, Salama A, Dixon R
Publication type: Article
Publication status: Published
Journal: Journal of Finance, Accounting and Management
Year: 2014
Volume: 5
Issue: 1
Pages: 125-160
Print publication date: 01/01/2014
Online publication date: 01/01/2014
Acceptance date: 01/01/1900
ISSN (print): 2153-2818
ISSN (electronic): 2153-2826
Publisher: Global Strategic Management, Inc.
URL: https://www.questia.com/library/journal/1P3-3242559631/are-independent-directors-and-supervisory-directors
