Corporate Governance and Accruals Earnings Management

Managerial and Decision Economics, Volume 32, Issue 7, Pages 439-456

49 Pages Posted: 19 Jul 2011 Last revised: 3 Dec 2014

See all articles by Leonidas C. Doukakis

Leonidas C. Doukakis

University of Lausanne, HEC

Fivos V. Bekiris

Athens University of Economics and Business

Date Written: October 1, 2011


This study examines the association between corporate governance and accruals earnings management using a Corporate Governance Index (CGI) consisting of 55 individual corporate governance measures. Prior literature has focused primarily on certain individual corporate governance measures, overlooking the multidimensional character of corporate governance. Based on a sample of firms listed on the Athens, Milan and Madrid Stock Exchanges, we find an inverse relationship between corporate governance and earnings management. Corporate governance provisions seem to constrain the tendency of management to manage earnings leading to higher credibility for financial statements. Additional tests suggest that the negative relationship holds for large and middle capitalization firms, but not for the small capitalization sample. In addition, corporate governance provisions limit upwards but not downwards earnings management. This study emphasizes the multilevel character of corporate governance and suggests the usage of comprehensive measures of corporate governance in the academic research. This study also stresses the importance of introducing corporate governance mechanisms in order to ensure the integrity of the financial reporting process. Practitioners are expected to evaluate the corporate governance provisions that each firm has put in place while policy makers are expected to mandate the application of a wide range of corporate governance mechanisms.

Keywords: Corporate Governance, Accruals Earnings Management, Corporate Governance Rating, Greece, Italy, Spain

JEL Classification: G30, G38, M41

Suggested Citation

Doukakis, Leonidas C. and Bekiris, Fivos V., Corporate Governance and Accruals Earnings Management (October 1, 2011). Managerial and Decision Economics, Volume 32, Issue 7, Pages 439-456. Available at SSRN:

Leonidas C. Doukakis (Contact Author)

University of Lausanne, HEC ( email )

Unil Chamberonne, Batiment Anthropole
Lausanne, 1015

Fivos V. Bekiris

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34

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