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Article
Publication date: 9 July 2019

Lara Al-Haddad and Mark Whittington

This paper aims to investigate the impact of corporate governance (CG) mechanisms on real (REM), accrual-based earnings management (AEM) and REM/AEM interaction in Jordan…

Abstract

Purpose

This paper aims to investigate the impact of corporate governance (CG) mechanisms on real (REM), accrual-based earnings management (AEM) and REM/AEM interaction in Jordan following the 2009 Jordanian CG Code (JCGC).

Design/methodology/approach

The study used a sample of 108 Jordanian public firms covering 2010-2014. Hypotheses are tested using pooled OLS-regression models.

Findings

The authors find that both institutional and managerial ownership constrain the use of REM and AEM. In contrast, both independent directors and large shareholders are found to exaggerate such practices, and CEO-duality is found to exaggerate REM only. However, foreign ownership does not appear to have a significant impact. They further find that managers use REM and AEM jointly to obtain the greatest earnings impact.

Practical implications

The findings have important implications for policymakers, regulators, audit professionals and investors in their attempts to constrain earnings management (EM) practices and improve financial reporting quality in Jordan.

Originality/value

The authors believe this to be the first Jordanian study examining the relationship between CG mechanisms and both REM and AEM following the introduction of the 2009 JCGC, as well as the first in Jordan and the Middle East to examine board characteristics and REM. Moreover, it is the first to test for the potential substitution of REM and AEM since the 2009 JCGC enactment. As such, the findings draw attention to EM practices and the role of monitoring mechanisms in Jordan.

Details

Corporate Governance: The International Journal of Business in Society, vol. 19 no. 6
Type: Research Article
ISSN: 1472-0701

Keywords

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Article
Publication date: 26 September 2019

Muhammad Safdar Sial, Xuan Vinh Vo, Lara Al-Haddad and Thao Nguyen Trang

The purpose of this paper is to check the impact of female directors on the board and foreign institutional investors on earnings manipulation.

Abstract

Purpose

The purpose of this paper is to check the impact of female directors on the board and foreign institutional investors on earnings manipulation.

Design/methodology/approach

The data sample includes Chinese listed companies on the Shenzhen and Shanghai stock exchanges. The data are collected from China Stock Market and Accounting Research database covering the period from 2010 to 2017. The authors use a dynamic generalized method of moments in the study.

Findings

The findings show that the presence of female director on the board has a significant negative impact on both discretionary accruals and real earning management. However, the authors obtain different results for foreign institutional investor investors. This may be the result of myopia as the foreign institutional stockholders in Chinese companies are looking for quick profit encouraging management to manipulate earnings. the findings survive several robustness tests.

Originality/value

The authors expect the research results provide ample evidence about how female directors affects earnings manipulation, and also hope the research helps to understand how, in China, institutional ownership affects earnings manipulation.

Details

Asia-Pacific Journal of Business Administration, vol. 11 no. 3
Type: Research Article
ISSN: 1757-4323

Keywords

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Article
Publication date: 8 January 2020

Ali Meftah Gerged, Lara Mohammad Al-Haddad and Meshari O. Al-Hajri

This study aims to investigate the association between corporate environmental disclosure (CED) and earnings management (EM) in a Gulf Cooperation Council (GCC) emerging…

Abstract

Purpose

This study aims to investigate the association between corporate environmental disclosure (CED) and earnings management (EM) in a Gulf Cooperation Council (GCC) emerging market, namely, Kuwait.

Design/methodology/approach

Using panel data from firms listed on the Kuwaiti stock exchange from 2010 to 2014, this paper applies a fixed-effects model to examine the CED-EM nexus. This analysis was supplemented with estimating a two-stage least-squares (2SLS) model and a generalised method of moment model to address any concerns regarding endogeneity problems.

Findings

The results are suggestive of a significant and negative relationship between CED and EM in Kuwait. This implies that the environmentally responsible managers are less likely to be engaged in EM practices in Kuwait.

Research limitations/implications

The theoretical implication of the results of this study is that managers in Kuwait seem to use CED as a method to decrease the possibility of any formal or informal actions that could be imposed upon their activities.

Originality/value

So far, a limited number of studies focused on examining the CED-EM nexus internationally. Furthermore, studies carried out to examine the CED-EM link within a GCC market is virtually non-existent. This study, therefore, presents the first empirical analysis of this relationship in Kuwait. Also, this study is of a significant value stemming from the environmental challenges that are facing Kuwait as an oil-reliant economy coupled together with the crucial economic development in Kuwait and its critical contribution to the GCC economy.

Details

Accounting Research Journal, vol. 33 no. 1
Type: Research Article
ISSN: 1030-9616

Keywords

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Article
Publication date: 12 June 2020

Mohammad Alhadab, Modar Abdullatif and Israa Mansour

The purpose of this study is to examine the relation between related party transactions and both accrual and real earnings management practices in Jordanian industrial…

Abstract

Purpose

The purpose of this study is to examine the relation between related party transactions and both accrual and real earnings management practices in Jordanian industrial public-listed companies, taking into account the uniqueness of the Jordanian company ownership structure.

Design/methodology/approach

Data were collected from Jordanian industrial public-listed companies for the period 2011–2017. Accrual earnings management is measured by using the modified Jones model, whereas real earnings management and related party transactions are measured by using relevant proxies. A regression model is developed and used to assess the relation between related party transactions and earnings management, taking into account the effects of ownership concentration, family ownership and institutional ownership levels of the companies involved.

Findings

Accrual earnings management is negatively associated with related party transactions. Regarding the role of ownership structure, the presence of institutional investors is positively associated with using both related party transactions and real earnings management, whereas ownership concentration plays an efficient role to mitigate the use of both accrual earnings management and related party transactions. No statistically significant relations between real earnings management and related party transactions exist.

Practical implications

This study has direct practical implications for the Jordanian regulatory authorities to enact regulations to limit the misuse of related party transactions and earnings management transactions and ensure sufficient monitoring of these transactions because of their prevalence. Jordanian companies should also enhance their corporate governance systems to better approve and monitor such transactions, including enhancing the role of independent and non-controlling board members in this process.

Originality/value

Related party transactions are considered as a major concern of financial reporting quality in developed countries, and such transactions are found to be relatively more problematic in developing countries, where corporate governance is generally weak, and there is limited disclosure and transparency in financial reporting. From this perspective, this study is one of the very few studies in developing countries that explore the issue of related party transactions and their association with earnings management practices. Thus, the findings of this study can arguably be to some extent generalized to other developing country contexts, because of relatively similar business environment conditions, and therefore potentially fill a gap represented by the paucity of similar studies in developing countries.

Details

Journal of Financial Reporting and Accounting, vol. 18 no. 3
Type: Research Article
ISSN: 1985-2517

Keywords

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Article
Publication date: 3 June 2019

Amina Buallay

The performance and effectiveness of governance principles continue to be a matter of concern (Mollah and Zaman, 2015). Focusing on differences between conventional and…

Abstract

Purpose

The performance and effectiveness of governance principles continue to be a matter of concern (Mollah and Zaman, 2015). Focusing on differences between conventional and Islamic banks, this study aims to examine the relationship between governance and bank’s operational (return on assets [ROA]), financial (return on equity [ROE]) and market performance (Tobin’s q [TQ]).

Design/methodology/approach

This study examined 127 banks within the Mena countries for the 10 years 2007 through 2016, for a total of 1270 observations. The study’s independent variable is corporate governance principles; the dependent variables are ROA, ROE and TQ. Also, the study uses bank- and country-specific control variables to help measure the relationship between governance and bank performance.

Findings

The findings deduced from the empirical results demonstrate that Sharia’ah governance significantly influenced ROA and ROE. However, corporate governance significantly influenced TQ. Furthermore, the results indicated that there were differences between Sharia’ah governance and corporate governance with regard to operational, financial and market performance.

Originality/value

The study provides insights into the differences in the relationship between Sharia’ah governance, corporate governance and the improvement of performance, which might be used by both banks to re-adopt the governance practices in enhancing the operational, financial and market performance.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 12 no. 2
Type: Research Article
ISSN: 1753-8394

Keywords

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Article
Publication date: 6 December 2020

Santosh K. Saraswat and Abhijeet K. Digalwar

The purpose of this paper is to develop an integrated fuzzy multi-criteria decision-making (MCDM) model for evaluation of the energy alternates in India based on their…

Abstract

Purpose

The purpose of this paper is to develop an integrated fuzzy multi-criteria decision-making (MCDM) model for evaluation of the energy alternates in India based on their sustainability.

Design/methodology/approach

A fuzzy analytical hierarchy process approach is used for the weight calculation of the criteria and the fuzzy technique for order preference by similarity to the ideal solution is used for ranking of the energy alternates. Seven energy sources – thermal, gas power, nuclear, solar, wind, biomass and hydro energy are considered for the assessment purpose on the basis of sustainability criteria, namely, economic, technical, social, environmental, political and flexible.

Findings

The result of the analysis shows that economics is the highest weight criterion, followed by environmental and technical criteria. Solar energy was chosen as the most sustainable energy alternate in India, followed by wind and hydro energy.

Research limitations/implications

Few other MCDM techniques such as VIseKriterijumska Optimizacija I Kompromisno Resenje (multi-criteria optimization and compromise solution), weighted sum method and preference ranking organization method for enrichment evaluations – II can also be explored for the sustainability ranking of the energy alternates. However, the present model has also provided a good result.

Practical implications

The present research work will help the decision-makers and organizations in the evaluation and prioritizing the various energy sources on the scale of sustainability.

Social implications

Research finding provides guidance to government and decision-makers regarding the development of social conditions through energy security, job creation and economic benefits.

Originality/value

Research work can be act as a supplement for the investors and decision-makers specifically in prioritizing the investment perspective and to support other multi-perspective decision-making problems.

Details

International Journal of Energy Sector Management, vol. 15 no. 1
Type: Research Article
ISSN: 1750-6220

Keywords

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