IMPACT OF INTERNAL OWNERSHIP ON THE MONITORING AND MITIGATING MECHANISMS OF EARNINGS MANAGEMENT PRACTICES

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Anas Najeeb Mosa Ghazalat, Md.Aminul Islam, Idris Bin Mohd Noor

DOI:10.22495/cocv14i2c2p2

Abstract

This paper attempts to review on how the effectiveness of board of directors and the executive compensations are moderated by internal ownership such as managerial and family ownership to mitigate earnings management. Most of prior studies focused on the traditional interaction among corporate governance mechanisms and earnings management, thus neglected that the variance of these practices that can be attributed to the business environment and the nature of ownership structure. This paper revisits the literature on the relationship between the factors of effectiveness of the board of directors in the individual level such as board independence, size, meeting frequency, CEO duality, audit and nominations-compensations committees, directors financial expertise, tenures and multiple directorship etc. and as a bundle through creating a score of effectiveness on the earnings management practices. It also reviews on whether the managerial and family ownership can moderate the relationship between the factors of effectiveness of the board of directors (as a score) and the total executive compensation with the earnings management practices. Panel data analysis method will applied over the data collected for ASE for the Jordanian listed firms for the period after the issuing of the Jordanian corporate codes in 2009. This paper’s contributes to the existing literature by providing an in-depth review of corporate governance mechanisms and earning management.

Keywords: Earnings Management, Corporate Governance, Board of Directors, the Competency of the Members, Executive Compensations, Internal Ownership

JEL Classification: G32, G34, M12, M41

Date received: 24 November 2016

Date accepted: 2 February 2017

How to cite this paper: Ghazalat, A. N. M., Islam, M. A., & Noor, I. B. M. (2017). Impact of internal ownership on the monitoring and mitigating mechanisms of earnings management practices. Corporate Ownership & Control, 14(2-2), 289-295. http://doi.org/10.22495/cocv14i2c2p2