TY - JOUR
T1 - Depressing earnings management in Palestinian corporations
T2 - The role of audit quality, audit committee, and accounting conservatism
AU - Alia, Muiz Abu
AU - Abdeljawad, Islam
AU - Yaaqbeh, Mohammad
PY - 2020
Y1 - 2020
N2 - The influence of audit quality, the existence of an audit committee, and accounting conservatism in depressing earnings management (EM) were examined in this study while controlling for board characteristics, financial leverage, and client's company size. A regression model on a sample of 184 firm-year observations of 34 companies listed on Palestine Exchange (PEX) between 2011 and 2016 was employed. Based on the results, the independent variables demonstrated negative association to discretionary accruals, measured by four modified versions of Jones model, as a proxy for EM; in other words, the variables were effective in depressing EM and consequently, in enhancing the financial statement quality. A similar negative association was also demonstrated by board size and chief executive officer (CEO) duality. Meanwhile, financial leverage and EM showed a robust positive association suggesting that Palestinian corporations employed EM mainly to influence creditors' decisions. Policy makers should consider the results presented in this study to improve regulations related to reporting and governance.
AB - The influence of audit quality, the existence of an audit committee, and accounting conservatism in depressing earnings management (EM) were examined in this study while controlling for board characteristics, financial leverage, and client's company size. A regression model on a sample of 184 firm-year observations of 34 companies listed on Palestine Exchange (PEX) between 2011 and 2016 was employed. Based on the results, the independent variables demonstrated negative association to discretionary accruals, measured by four modified versions of Jones model, as a proxy for EM; in other words, the variables were effective in depressing EM and consequently, in enhancing the financial statement quality. A similar negative association was also demonstrated by board size and chief executive officer (CEO) duality. Meanwhile, financial leverage and EM showed a robust positive association suggesting that Palestinian corporations employed EM mainly to influence creditors' decisions. Policy makers should consider the results presented in this study to improve regulations related to reporting and governance.
KW - Accounting conservatism
KW - Audit committee
KW - Audit quality
KW - Earnings management
KW - Palestine
UR - http://www.scopus.com/inward/record.url?scp=85091821978&partnerID=8YFLogxK
U2 - 10.1504/IJRM.2020.109419
DO - 10.1504/IJRM.2020.109419
M3 - Article
AN - SCOPUS:85091821978
VL - 11
SP - 213
EP - 236
JO - International Journal of Revenue Management
JF - International Journal of Revenue Management
SN - 1474-7332
IS - 3
ER -