IDEAS home Printed from https://ideas.repec.org/a/vrs/manmar/v13y2018i2p985-994n9.html
   My bibliography  Save this article

Board independence, earnings management and the moderating effect of family ownership in Jordan

Author

Listed:
  • Idris Mohammed

    (Applied Science Private University, Amman, Jordan)

  • Siam Yousef Abu

    (Applied Science Private University, Amman, Jordan)

  • Nassar Mahmoud

    (Applied Science Private University, Amman, Jordan)

Abstract

This research examines the moderating effect of family ownership over the relationship between board independence and earnings management. Using information of industrial companies indexed on Amman Stock Exchange, this research provides evidence of negative relationship between board independence and earnings management, proposing that higher percentage of board independence is related with more effective monitoring to reduce earnings management. Moreover, the results document that the relationship between board independence and earnings management becomes weak when there is an interaction with family ownership control. These outcomes indicate that an increase in the percentage of independent directors to mitigate earnings management is less likely to be influential in the case of family controlled firms. The results of this research could be valuable to regulators in their efforts to restrict the incidence of earnings management and improve the quality of monitoring mechanisms, especially in an environment where the capital market is still evolving and the legal protection and law enforcement are weak.

Suggested Citation

  • Idris Mohammed & Siam Yousef Abu & Nassar Mahmoud, 2018. "Board independence, earnings management and the moderating effect of family ownership in Jordan," Management & Marketing, Sciendo, vol. 13(2), pages 985-994, June.
    • Handle: RePEc:vrs:manmar:v:13:y:2018:i:2:p:985-994:n:9
    DOI: 10.2478/mmcks-2018-0017
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/mmcks-2018-0017
    Download Restriction: no
    File URL: https://libkey.io/10.2478/mmcks-2018-0017?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
    ---><---

    References listed on IDEAS

    as
    1. K.V. Peasnell & P.F. Pope & S. Young, 2005. "Board Monitoring and Earnings Management: Do Outside Directors Influence Abnormal Accruals?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(7‐8), pages 1311-1346, September.
    2. Norziana Lokman & Joseph M Mula & Julie Cotter, 2014. "Importance of Corporate Governance Quality and Voluntary Disclosures of Corporate Governance Information in Listed Malaysian Family Controlled Businesses," International Journal of Sustainable Development & World Policy, Conscientia Beam, vol. 3(1), pages 1-24.
    3. Jaggi, Bikki & Leung, Sidney & Gul, Ferdinand, 2009. "Family control, board independence and earnings management: Evidence based on Hong Kong firms," Journal of Accounting and Public Policy, Elsevier, vol. 28(4), pages 281-300, July.
    4. David Alexander, 2010. "Corporate governance and earnings management: going beyond agency theory and secondary data," International Journal of Corporate Governance, Inderscience Enterprises Ltd, vol. 2(1), pages 31-41.
    5. Ming-Feng Hsu & Shiow-Ying Wen, 2015. "The Influence of Corporate Governance in Chinese Companies on Discretionary Accruals and Real Earnings Management," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(3), pages 391-406.
    6. Yung-Chuan Lee, 2013. "Can Independent Directors Improve the Quality of Earnings? Evidence from Taiwan," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 3(3), pages 1-4.
    7. Kothari, S.P. & Leone, Andrew J. & Wasley, Charles E., 2005. "Performance matched discretionary accrual measures," Journal of Accounting and Economics, Elsevier, vol. 39(1), pages 163-197, February.
    8. Klein, April, 2002. "Audit committee, board of director characteristics, and earnings management," Journal of Accounting and Economics, Elsevier, vol. 33(3), pages 375-400, August.
    9. Xie, Biao & Davidson, Wallace III & DaDalt, Peter J., 2003. "Earnings management and corporate governance: the role of the board and the audit committee," Journal of Corporate Finance, Elsevier, vol. 9(3), pages 295-316, June.
    10. Kelton, Andrea S. & Yang, Ya-wen, 2008. "The impact of corporate governance on Internet financial reporting," Journal of Accounting and Public Policy, Elsevier, vol. 27(1), pages 62-87.
    11. Gorm Gabrielsen & Jeffrey D. Gramlich & Thomas Plenborg, 2002. "Managerial Ownership, Information Content of Earnings, and Discretionary Accruals in a Non-US Setting," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(7&8), pages 967-988.
    12. Gorm Gabrielsen & Jeffrey D. Gramlich & Thomas Plenborg, 2002. "Managerial Ownership, Information Content of Earnings, and Discretionary Accruals in a Non–US Setting," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(7‐8), pages 967-988.
    13. K.V. Peasnell & P.F. Pope & S. Young, 2005. "Board Monitoring and Earnings Management: Do Outside Directors Influence Abnormal Accruals?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(7-8), pages 1311-1346.
    14. Ming-Feng Hsu & Shiow-Ying Wen, 2015. "The Influence of Corporate Governance in Chinese Companies on Discretionary Accruals and Real Earnings Management," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(3), pages 391-406, March.
    15. DeFond, Mark L. & Park, Chul W., 1997. "Smoothing income in anticipation of future earnings," Journal of Accounting and Economics, Elsevier, vol. 23(2), pages 115-139, July.
    16. Flora F. Niu, 2006. "Corporate governance and the quality of accounting earnings: a Canadian perspective," International Journal of Managerial Finance, Emerald Group Publishing, vol. 2(4), pages 302-327, September.
    17. Ryan Davidson & Jenny Goodwin‐Stewart & Pamela Kent, 2005. "Internal governance structures and earnings management," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 45(2), pages 241-267, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zhang, Yuyang & Uchida, Konari & Bu, Hua, 2013. "How do accounting standards and insiders' incentives affect earnings management? Evidence from China," Emerging Markets Review, Elsevier, vol. 16(C), pages 78-99.
    2. Ahsan Habib & Md. Borhan Uddin Bhuiyan, 2016. "Problem directors on the audit committee and financial reporting quality," Accounting and Business Research, Taylor & Francis Journals, vol. 46(2), pages 121-144, February.
    3. Greco, Giulio, 2012. "Ownership structures, corporate governance and earnings management in the European Oil Industry," MPRA Paper 37198, University Library of Munich, Germany.
    4. Chia-Ling Chao & Shwu-Min Horng, 2013. "Asset write-offs discretion and accruals management in Taiwan: the role of corporate governance," Review of Quantitative Finance and Accounting, Springer, vol. 40(1), pages 41-74, January.
    5. Wan Razazila Wan Abdullah & Enny Nurdin Sutan Maruhun & Masetah Ahmad Tarmizi & Liyana Ab. Rahman, 2018. "Mitigating Earnings Management: Adoption of IFRS and Corporate Governance Practices in Malaysia," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 8(2), pages 760-772, February.
    6. Chanchal Chatterjee, 2020. "Board Quality and Earnings Management: Evidence from India," Global Business Review, International Management Institute, vol. 21(5), pages 1302-1324, October.
    7. Hanh Thi My Le & Qian Long Kweh & Irene Wei Kiong Ting & Mohammad Nourani, 2022. "CEO power and earnings management: Dual roles of foreign shareholders in Vietnamese listed companies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1240-1256, January.
    8. Stockmans, Annelies & Lybaert, Nadine & Voordeckers, Wim, 2013. "The conditional nature of board characteristics in constraining earnings management in private family firms," Journal of Family Business Strategy, Elsevier, vol. 4(2), pages 84-92.
    9. Sattar Khan & Yasir Kamal & Muhammad Abbas & Shahid Hussain, 2022. "Board of directors and earnings manipulation: evidence from regulatory change," Future Business Journal, Springer, vol. 8(1), pages 1-22, December.
    10. Mohamed Khalil & Aydin Ozkan, 2016. "Board Independence, Audit Quality and Earnings Management: Evidence from Egypt," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 15(1), pages 84-118, April.
    11. Benjamin T. Albersmann & Daniela Hohenfels, 2017. "Audit Committees and Earnings Management – Evidence from the German Two-Tier Board System," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 18(2), pages 147-178, May.
    12. Zhi‐Yuan Feng & Hua‐Wei Huang, 2021. "Corporate governance and earnings management: A quantile regression approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5056-5072, October.
    13. Nguyen, Quynh & Kim, Maria H. & Ali, Searat, 2024. "Corporate governance and earnings management: Evidence from Vietnamese listed firms," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 775-801.
    14. Callen, Jeffrey L. & Fang, Xiaohua & Zhang, Wenjun, 2020. "Protection of proprietary information and financial reporting opacity: Evidence from a natural experiment," Journal of Corporate Finance, Elsevier, vol. 64(C).
    15. Anis Mnif, 2009. "Corporate Governance And Management Earnings Forecast Quality: Evidence From French Ipos," Post-Print halshs-00459171, HAL.
    16. David B. Bryan & Terry W. Mason, 2020. "Independent director reputation incentives, accruals quality and audit fees," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(7-8), pages 982-1011, July.
    17. Balachandran, Balasingham & Faff, Robert, 2015. "Corporate governance, firm value and risk: Past, present, and future," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 1-12.
    18. Elshandidy, Tamer & Kamel, Hany, 2024. "Tone of narrative disclosures and earnings management: UK evidence," Advances in accounting, Elsevier, vol. 64(C).
    19. Pavlopoulos, Athanasios & Magnis, Chris & Iatridis, George Emmanuel, 2017. "Integrated reporting: Is it the last piece of the accounting disclosure puzzle?," Journal of Multinational Financial Management, Elsevier, vol. 41(C), pages 23-46.
    20. Yijiang Zhao & Kung H. Chen, 2008. "The Influence of Takeover Protection on Earnings Management," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(3‐4), pages 347-375, April.

    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:vrs:manmar:v:13:y:2018:i:2:p:985-994:n:9. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    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.