Corporate Governance and Earnings Management: A Meta-Analysis

17 Pages Posted: 8 Oct 2009

See all articles by Emma García‐Meca

Emma García‐Meca

Universidad Politécnica de Cartagena

Juan P. Sánchez-Ballesta

University of Murcia


The goal of this paper is to meta-analyze the results of 35 studies that examine the effect on earnings management of firms’ boards of directors and ownership structure.We examine whether differences in results are attributable to moderating effects related to the system of corporate governance, the measurement of the governance variable, or the particular specifications of discretionary accruals models.

The findings show that the variation in the results of previous studies on CEO duality and audit committee independence are caused by sampling error. In addition, the measurement of dependent variable, discretionary accruals, and the corporate governance system moderate the association between earnings management and some corporate governance variables.

The measurement of variables, especially discretionary accruals, influences the findings found in previous studies. The findings emphasize the need to explicitly consider the legal and institutional setting when one analyzes the effect of mechanisms of corporate governance on discretionary accruals. Future research should include matrix correlations, and consider detailed measures of earnings management and more attributes of boards of directors in order to facilitate research using meta-analysis.

The results suggest that board independence, board size, and audit committee independence can improve investor confidence by constraining earnings management. Additional empirical evidence regarding refined measures of ownership and board, specifically board independence, would be very useful in gaining greater understanding of how the different approaches to these constructs influence earnings management.

Suggested Citation

García-Meca, Emma and Sánchez-Ballesta, Juan P., Corporate Governance and Earnings Management: A Meta-Analysis. Corporate Governance: An International Review, Vol. 17, Issue 5, pp. 594-610, September 2009, Available at SSRN: or

Emma García-Meca (Contact Author)

Universidad Politécnica de Cartagena ( email )

Departamento Economia Financiera y Contabilidad
Cartagena, Murcia 30201

Juan P. Sánchez-Ballesta

University of Murcia ( email )

Avda Teniente Flomesta, 5
Murcia, Murcia 30100

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