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Corporate governance, Islamic governance and earnings management in Oman: A new empirical insights from a behavioural theoretical framework

Mohamed I. Elghuweel (Accounting and Finance, University of Glasgow, Glasgow, UK)
Collins G. Ntim (Department of Accounting, Southampton Business School, University of Southampton, Southampton, UK) (Department of Accountancy and Finance, Huddersfield University, Huddersfield, UK)
Kwaku K. Opong (Accounting and Finance, University of Glasgow, Glasgow, UK)
Lynn Avison (Department of Accountancy and Finance, Huddersfield University, Huddersfield, UK)

Journal of Accounting in Emerging Economies

ISSN: 2042-1168

Article publication date: 2 May 2017

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Abstract

Purpose

The purpose of this paper is to examine the impact of corporate (CG) and Islamic (IG) governance mechanisms on corporate earnings management (EM) behaviour in Oman.

Design/methodology/approach

The authors employ one of the largest and extensive data sets to-date on CG, IG and EM in any developing country, consisting of a sample of 116 unique Omani listed corporations from 2001 to 2011 (i.e. 1,152 firm-year observations) and a broad CG index containing 72 CG provisions. The authors also employ a number of robust econometric models that sufficiently account for alternative CG/EM proxies and potential endogeneities.

Findings

First, the authors find that, on average, better-governed corporations tend to engage significantly less in EM than their poorly governed counterparts. Second, the evidence suggests that corporations that depict greater commitment towards incorporating Islamic religious beliefs and values into their operations through the establishment of an IG committee tend to engage significantly less in EM than their counterparts without such a committee. Finally and by contrast, the authors do not find any evidence that board size, audit firm size, the presence of a CG committee and board gender diversity have any significant relationship with the extent of EM.

Originality/value

To the best of the authors’ knowledge, this is a first empirical attempt at examining the extent to which CG and IG structures may drive EM practices that explicitly seek to draw new insights from a behavioural theoretical framework (i.e. behavioural theory of corporate boards and governance).

Keywords

Acknowledgements

The authors would like to express the gratitude to the editor, Professor Shazad Uddin and two anonymous reviewers for their constructive comments. The authors would also like to appreciate useful comments received from participants at the Accounting and Finance in Emerging Economies (AFEE) Special Interest Group of the British Accounting and Finance Association (BAFA) workshop that was organised at the University of Strathclyde University, Glasgow, UK in June 2014.

Citation

Elghuweel, M.I., Ntim, C.G., Opong, K.K. and Avison, L. (2017), "Corporate governance, Islamic governance and earnings management in Oman: A new empirical insights from a behavioural theoretical framework", Journal of Accounting in Emerging Economies, Vol. 7 No. 2, pp. 190-224. https://doi.org/10.1108/JAEE-09-2015-0064

Publisher

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Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

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