Audit committee composition and earnings management in a specific institutional environment: the case of Russia
ISSN: 1472-0701
Article publication date: 25 May 2022
Issue publication date: 12 October 2022
Abstract
Purpose
The purpose of this paper is to investigate the specifics of the relationship between audit committee characteristics and earnings management in Russian listed companies. This research is driven by the possibility of placing this relationship within the context of a specific institutional environment for company performance.
Design/methodology/approach
The authors apply a panel study of 184 Russian listed companies for the period 2014–2018. In addition to the standard fixed effects model, the authors test the results for potential endogeneity with two-stage least squares (2SLS) analysis.
Findings
The results show that audit committee representation on the board of directors results in some mitigation of earnings management. Results reveal that a higher level of audit committee independence and the presence of financial expertise on the committee are associated with lower earnings management. However, companies with relatively busy directors on audit committees are more inclined to practice earnings management. The study’s findings hold after testing for endogeneity of audit committee independence. The authors also reveal that some audit committee characteristics (for example, audit committee independence; its level of expertise) alleviate earnings management in listed state-owned companies (SOEs) more strongly than in listed non-SOEs.
Originality/value
The results add to the ongoing debate on the role of corporate governance mechanisms in mitigating earnings management in emerging markets by taking into account the type of ownership (state-owned vs private) as a moderating variable. This study reveals, in particular, that the effect of certain audit committee characteristics on earnings management is more prominent in listed SOEs than in listed non-SOEs.
Keywords
Acknowledgements
The authors thank editors and anonymous reviewers for their comments and suggestions that helped to improve the paper.
Funding: The research has been conducted with financial support from St. Petersburg State University, Russia (Grant ID: 41106330).
Citation
Nikulin, E.D., Smirnov, M.V., Sviridov, A.A. and Bandalyuk, O.V. (2022), "Audit committee composition and earnings management in a specific institutional environment: the case of Russia", Corporate Governance, Vol. 22 No. 7, pp. 1491-1522. https://doi.org/10.1108/CG-01-2021-0011
Publisher
:Emerald Publishing Limited
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