The Effect of Corporate Governance on The Trade-off between Real Earnings Management and Accrual-based Earnings Management

• Main Authors: JHENG-SIN HUANG, 黃正新
• Other Authors: Li-Kai Liao
• Format: Others
• Language: zh-TW
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/34454745242547670824

碩士 === 東海大學 === 會計學系 === 102 === This study analyzes the relationship between earnings management and corporate governance mechanisms. Corporate governance mechanisms are defined based on the three main motivations for earnings management proposed by Healy and Wahlen in 1999, and include takeover threat, incentive compensation, debt covenants and board independent. This research, considering the interaction of various corporate governance mechanisms, further investigates how corporate governance affect the trade-off relationship between accrual-based earnings management and real earnings management. The research explores the listed companies in the US from 1996 and 2008. The empirical result shows that takeover threat and incentive compensation effectively restrain accrual-based earnings management while incentive compensation, debt convenants and board independent effectively restrain real activities earnings management. In addition, comprehensive corporate governance are negatively associated with two earnings management methods, proving that corporate governance mechanisms decrease effectively the three main motivations and reduce earnings management. Meanwhile, this study demonstrates that corporate governance mechanisms effectively restrain management from using accrual-based and real activities earnings management at the same time.