Abstract
This paper aims to test the impact of some corporate governance characteristics on the management of the accounting earnings measured by discretionary accruals. As for the prior research we treat the level of management of accounting earnings as a "proxy" for the quality of the accounting and financial information published by companies. Empirical analysis is based on the modified Jones model (1995) to estimate discretionary accruals and a panel data model applied to a sample of 21 companies listed on the Tunis Stock Exchange (BVMT) over a period of 3 years from 2008 to 2010. The main findings of the current study reveal that, in the Tunisian context, the affiliation of auditors to a "Big" international network and the independence of the board of directors significantly constrain the practice of managing the accounting earnings and, consequently, they improve the quality of the published result. However, the number of independent members in the audit committee has a negative but not significant impact on the practice of earnings management, whereas the duration of the audit mandate does not affect this practice.Finally, the control variables taken into account in our study have a significant effect on the quality of the accounting result.Thus, the results of this study helped to improve our understanding of earnings management in Tunisian companies, with reference to some characteristics of corporate governance.
Highlights
Financial scandals, notably those of Enron, worldcom (USA), Parmalat (Europe) and Batam (Tunisia) have created a crisis of confidence in the financial markets by affecting the reliability of the financial information and the effectiveness of the governance bodies put in place
The main findings of the current study reveal that, in the Tunisian context, the affiliation of auditors to a "Big" international network and the independence of the board of directors significantly constrain the practice of managing the accounting earnings and, they improve the quality of the published result
At this level, that the objective of our work is to examine the impact of certain corporate governance mechanisms on the quality of the accounting result published by listed Tunisian companies
Summary
Notably those of Enron, worldcom (USA), Parmalat (Europe) and Batam (Tunisia) have created a crisis of confidence in the financial markets by affecting the reliability of the financial information and the effectiveness of the governance bodies put in place Faced with these repeated accounting manipulations, the intervention of an independent and competent external auditor is useful; this will ensure the credibility of the financial information. Research in financial accounting has undergone significant developments in the late 1970s in light of the work of Watts and Zimmerman (1986) which intended to explain the practices observed and to predict the accounting choices made by managers and standardizers This line of research is titled the Positive Accounting Theory, borrowing its models from the agency theory and the economic theory of regulation (Casta, 2000). According to Dumontier and Raffounier (1999), positive research in financial accounting aims, on the one hand, to assess the informational content of accounting figures and, on the other hand, to explain accounting decisions based on agency relationships and political costs
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