Abstract
This study explores the effect of the board of directors’ characteristics on real earnings management in Jordanian non-financial companies listed on the Amman Stock Exchange. The sample size is 131 companies during the period of 2015–2017. The study uses a board of directors’ size, board members’ independence, board members’ financial experience, number of board meetings, membership in more than one board, and the ownership of board members of company shares to represent the board of directors’ characteristics. Real earnings management is measured using the Roychowdhury model (2006). A multiple regression analysis (panel data) is used to investigate the effect of the board of directors’ characteristics on real earnings management. The study found a negative and statistically significant impact for both: board members’ independence and board members’ financial experience on earnings management through real activities against the previous studies’ findings, this research measured the impact of real activities. On the other hand, the study did not find any statistically significant effect of the additional earnings management variables through actual activities
Highlights
After several recent financial scandals, such as Worldcom, Enron, and Xerox, and the global financial crisis starting in 2008, there has been increasing attention towards developing and implementing corporate governance mechanisms
This study aims to highlight earnings management’s problem through using real activities in Jordanian listed companies to stand over the earning management practices, by answering a very important question: What is the real impact of board of directors characteristics on earning management? the study contributes to presenting the reality of earnings management practice with real activities in listed companies
The lowest value is 0.0002, and the highest value is 1.67, which indicates that some Jordanian listed companies do not practice earnings management through real activities yet and the arithmetic mean for the board of directors’ size is 7.45, with a standard deviation of 2.19 and we can observe that the lowest and highest value ranges between 3 and 13, which means that the nonfinancial Jordanian public shareholding companies do not adhere to applying the rules of Jordanian governance related to the number of board members
Summary
After several recent financial scandals, such as Worldcom, Enron, and Xerox, and the global financial crisis starting in 2008, there has been increasing attention towards developing and implementing corporate governance mechanisms. The board of directors is one of the tools in the overall mechanism of governance that has proven to be effective in raising institutions’ performance and developing the economy. Many practices have been used to achieve the above target, for example, monitoring, following-up, and ensuring the proper functioning of operations and the publication of financial reports that reflect the company’s operations (Zidan, 2017). The independence of board members is one of them, which means that members from outside the board have no relationship with the company. They are real observers of the performance of management (Fama & Jensen, 1983)
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
