IDEAS home Printed from https://ideas.repec.org/a/sae/sagope/v14y2024i4p21582440241298402.html
   My bibliography  Save this article

The Threshold Effects of National Governance Quality on the Earnings Management – Performance Nexus: Evidence From Dynamic Panel Threshold Regression

Author

Listed:
  • Emmanuel Mensah
  • Christopher Boachie

Abstract

The present study revisits the relationship between earnings management (EM) and firm performance, employing a nonlinear threshold approach and introducing national governance quality (NGQ) as a potential threshold variable. This study demonstrates how NGQ at the country level influences the impact of EM on firms’ performance at the micro level. Utilizing dynamic frameworks with data encompassing 52 firm samples across nine sub-Saharan African countries spanning from 2007 to 2019, the study reveals that the beneficial impact of EM on performance materializes when NGQ falls below a certain threshold. Beyond this threshold, the influence of EM becomes marginal or occasionally adverse on firm performance. As a result, we suggest that policymakers in Africa and other emerging and developing economies consider the estimated nonlinear relationship between EM and firm performance, as well as the NGQ threshold, when devising governance strategies. It is also imperative to consider institutional quality when making investment decisions and to promote rigorous standards for earnings management and institutional issues. JEL Classification: C24, C33, C38, G30, G34, M41.

Suggested Citation

  • Emmanuel Mensah & Christopher Boachie, 2024. "The Threshold Effects of National Governance Quality on the Earnings Management – Performance Nexus: Evidence From Dynamic Panel Threshold Regression," SAGE Open, , vol. 14(4), pages 21582440241, December.
    • Handle: RePEc:sae:sagope:v:14:y:2024:i:4:p:21582440241298402
    DOI: 10.1177/21582440241298402
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/21582440241298402
    Download Restriction: no
    File URL: https://libkey.io/10.1177/21582440241298402?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    corporate and national governance quality; earnings management; firm performance; dynamic panel threshold regression; Sub-Saharan Africa;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:sagope:v:14:y:2024:i:4:p:21582440241298402. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.