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National corporate governance, GMI ratings and earnings management

Author

Listed:
  • Moataz El-Helaly
  • Nermeen F. Shehata
  • Reem El-Sherif

Abstract

Purpose - The purpose of this paper is to assess the association between country-level corporate governance and earnings management (EM). It aims to investigate whether the Governance Metrics International (GMI; acquired by Morgan Stanley Capital International in 2014) rating for national corporate governance on a country level is a significant explanatory variable for the country-level EM score or otherwise. Design/methodology/approach - In a sample of 280 country-year observations during the period from 2000 to 2009, the paper measures national corporate governance quality using GMI ratings scores and whether the corporate governance model is Anglo Saxon or otherwise. Findings - The findings of this study show that corporate governance is a significant indicator of lower EM levels in a country. Practical implications - Corporate governance rating firms play a vital role in public markets. GMI provides country-level corporate governance ratings to assess the quality of corporate governance in several countries. The findings of this study show preliminary evidence that GMI ratings of corporate governance provide good guidance to investors on the quality of corporate governance in a country. Originality/value - This paper is the first empirical attempt to examine the association between country-level corporate governance, GMI ratings for country-level corporate governance and EM.

Suggested Citation

  • Moataz El-Helaly & Nermeen F. Shehata & Reem El-Sherif, 2018. "National corporate governance, GMI ratings and earnings management," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 26(3), pages 373-390, July.
    • Handle: RePEc:eme:arapps:ara-07-2017-0124
    DOI: 10.1108/ARA-07-2017-0124
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    Citations

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    Cited by:

    1. Komath, Muhammed Aslam Chelery & Doğan, Murat & Sayılır, Özlem, 2023. "Impact of corporate governance and related controversies on the market value of banks," Research in International Business and Finance, Elsevier, vol. 65(C).
    2. Wil Martens & Prem Yapa & Maryam Safari, 2021. "Earnings Management in Frontier Market: Do Institutional Settings Matter?," Economies, MDPI, vol. 9(1), pages 1-19, February.
    3. Tânia Menezes Montenegro, 2021. "Tax Evasion, Corporate Social Responsibility and National Governance: A Country-Level Study," Sustainability, MDPI, vol. 13(20), pages 1-19, October.

    More about this item

    Keywords

    Corporate governance; Earnings management; GMI ratings; G34; G41;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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