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EARNINGS MANAGEMENT AND INTERNAL MECHANISMS OF CORPORATE GOVERNANCE: EMPIRICAL EVIDENCE FROM CHILEAN FIRMS

Félix J. López-Iturriaga, Paolo Saona Hoffmann

DOI: 10.22495/cocv3i1p2

Abstract

We analyze the ability of the capital structure and the ownership structure as mechanisms of control of the managers of the firms and to reduce their accounting discretionary power for a sample of Chilean firms. Using earnings management and abnormal accruals as indicators of discretionary behavior, our results show that both debt and ownership concentration reduce the managers’ discretionary behavior, so we corroborate the outstanding role both mechanisms play in a country with low protection of investors’ rights. At the same time, we find that earnings management is fostered by institutional investor ownership.

Keywords: Accruals, Capital Structure, Corporate Governance, Earnings Management, Ownership Structure

How to cite this paper: López-Iturriaga, F. J., & Hoffmann, P. S. (2005). Earnings management and internal mechanisms of corporate governance: Empirical evidence from Chilean firms. Corporate Ownership & Control, 3(1), 17-29. http://doi.org/10.22495/cocv3i1p2

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