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The effect of multiple directorships on real and accrual-based earnings management

Author

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  • Kais Baatour
  • Hakim Ben Othman
  • Khaled Hussainey

Abstract

Purpose - The study aims to examine the effect of multiple directorships on accrual-based earnings management and real earnings management. It analyses whether earnings management practices in the Saudi context increase or decrease with the average number of multiple directorships. Design/methodology/approach - The study uses the approach by Roychowdhury (2006) to capture the level of real earnings management and uses the cross-sectional model by Jones (1991) to measure accrual-based earnings management. Findings - The paper provides partial evidence supporting the “busyness” hypothesis where earnings management practices increase with the number of multiple directorships. The evidence shows that multiple directorships have a positive and significant effect on real earnings management in the Kingdom of Saudi Arabia. However, we find no significant impact of multiple directorships on accrual-based earnings management. Originality/value - This is the first study that empirically investigates the relationship between multiple directorships and earnings management in the Kingdom of Saudi Arabia. The paper contributes to the limited literature on multiple directorships in developing countries by examining their impact on opportunistic real earnings management.

Suggested Citation

  • Kais Baatour & Hakim Ben Othman & Khaled Hussainey, 2017. "The effect of multiple directorships on real and accrual-based earnings management," Accounting Research Journal, Emerald Group Publishing Limited, vol. 30(4), pages 395-412, November.
    • Handle: RePEc:eme:arjpps:arj-06-2015-0081
    DOI: 10.1108/ARJ-06-2015-0081
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    Citations

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    Cited by:

    1. Nguyen Vinh Khuong & Nguyen Tran Thai Ha & Phung Anh Thu, 2019. "The Relationship between Real Earnings Management and Firm Performance: The Case of Energy Firms in Vietnam," International Journal of Energy Economics and Policy, Econjournals, vol. 9(2), pages 307-314.
    2. Abdul Halim Chew Abdullah, 2021. "Real Earnings Management: Do the Experience and Gender of Big4 Auditors Matters?," GATR Journals afr206, Global Academy of Training and Research (GATR) Enterprise.
    3. Hoang Thi Mai Khanh & Nguyen Vinh Khuong, 2018. "Audit Quality, Firm Characteristics and Real Earnings Management: The Case of Listed Vietnamese Firms," International Journal of Economics and Financial Issues, Econjournals, vol. 8(4), pages 243-249.
    4. Hidaya Lawati & Khaled Hussainey & Roza Sagitova, 2021. "Disclosure quality vis-à-vis disclosure quantity: Does audit committee matter in Omani financial institutions?," Review of Quantitative Finance and Accounting, Springer, vol. 57(2), pages 557-594, August.
    5. Mihai CARP & Iuliana Eugenia GEORGESCU, 2019. "The Influence of Audit Opinion on the Degree of Real Earnings Management. The Case of Romanian Listed Companies," The Audit Financiar journal, Chamber of Financial Auditors of Romania, vol. 17(156), pages 666-666.

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