Corporate Governance and Earnings Management: The Implications of Corporate Governance Best-Practice Principles for Taiwanese Listed Companies
Ken Y. Chen
National Taiwan University; National Taiwan University
Randal J. Elder
Journal of Contemporary Accounting and Economics, Forthcoming
This study investigates whether corporate governance characteristics, mandated by the Corporate Governance Best-Practice Principles (CGBPP) for companies listed in Taiwan, are associated with earnings management. In particular, we examine whether the independence, financial expertise, and voluntary formation of independent directorship (supervisorship) are associated with the absolute value of discretionary accruals. Our findings suggest that the independence of supervisors, financial expertise of independent directors, and voluntary formation of independent directorship (supervisorship) are associated with lower likelihood of earnings management. These findings are stronger after the CGBPP was enacted, suggesting that the implementation of CGBPP has lowered the likelihood of earnings management.
Number of Pages in PDF File: 47
Keywords: corporate governance, earnings management, financial expertise, family control, group-affiliation
JEL Classification: G34, M41, M43, M47Accepted Paper Series
Date posted: April 30, 2007
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