Corporate Governance and Earnings Management Practices among Listed Firms: A Study on Post Stock Market Crisis Period in Bangladesh

Abstract

This paper investigates the effect of corporate governance on earnings management practice of listed firms in Bangladesh during post stock market crisis period. The data set consists of 300 firm year observation from 2011-15. We have used six (6) corporate governance variables as independent variables namely board Size, CEO duality, board independence, board meeting, audit committee independence and ownership concentration. Leverage and firm size have been used as control variables. Our dependent variable is earnings management measured by discretionary accruals following Original Jones Model. Our panel data regression reveals CEO duality and audit committee independence have significant relationship with earnings management practices. This paper fills a gap in the literature by providing evidence about the effect of corporate governance quality on listed firms’ earnings management behavior in the context of stock market volatility. Finally, the study suggests that listed firms should enhance their compliance with corporate governance standards which will assist to constraint the unethical practices of earnings management.