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The effect of the board structure on earnings management: evidence from Portugal

Sandra Maria Geraldes Alves (School of Accountancy and Administration, University of Aveiro, Aveiro, Portugal)

Journal of Financial Reporting and Accounting

ISSN: 1985-2517

Article publication date: 25 October 2011




This study aims to extend previous research by examining empirically how board structure affects the magnitude of earnings management for companies listed in Portugal. In particular, the paper focuses on the main characteristics of the board structure that are highlighted by the Portuguese Securities Market Supervisory Authority recommendations, i.e. board size, board composition and board's monitoring committees.


The OLS regression model is used to examine the effect of the board structure on earnings management for a sample of 34 non‐financial listed Portuguese companies for the years 2002 to 2007.


The results support the predicted non‐linear relationship between board size and earnings management. It is also found that discretionary accruals are negatively related to board composition. However, no evidence is found that the existence of an audit committee affects the levels of earnings management.

Practical implications

The findings based on this study provide useful information for regulators in other countries. The results also provide useful information for investors in evaluating the impact of board structure on earnings quality, especially under concentrated ownership.


The major contribution of the current study is that, in contrast to similar studies, it does not assume that the two views on how board size associates with firms' earnings management behaviour are mutually exclusive. In addition, this paper is the first empirical study to investigate the effect of the board structure on earnings management in Portugal.



Geraldes Alves, S.M. (2011), "The effect of the board structure on earnings management: evidence from Portugal", Journal of Financial Reporting and Accounting, Vol. 9 No. 2, pp. 141-160.



Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited

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