Corporate Governance, Earnings Management and Firm Performance: An International Comparison

• In Event: Investor Protections

Abstract

Using a novel dataset of corporate governance that measures the quality of board functions, board structure, executive compensation policy, shareholder rights, and managerial vision and strategy, we examine the role of corporate governance in restricting earnings management and improving firm performance using a large international sample of 28 countries. Consistent with our predictions, we find that stronger corporate governance constrains earnings management activities and improves firm performance. The positive effect of corporate governance varies with the level of investor protection and is strongest in outsider economies with large stock markets, dispersed ownership, strong investor rights and strong legal enforcement.

Authors

• Hong Kim Duong, Salisbury University

• Helen Kang, UNSW Australia

• Stephen Brian Salter, Middle Tennessee State University