Use this URL to cite or link to this record in EThOS: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.599994
Title: Equity compensation incentives, earnings management, and corporate governance : the UK evidence
Author: Shabeeb Ali, Mohamed A.
Awarding Body: University of Surrey
Current Institution: University of Surrey
Date of Award: 2013
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Abstract:
The current thesis aims to answer the following three research questions: 1) What is the effect of corporate governance mechanisms on earnings management in the UK context? 2) Do equity incentives motivate UK executives to engage in opportunistic earnings management practices? 3) Can corporate governance mechanisms moderate the relationship between equity incentives and earnings management? To answer the first research question, a panel data set drawn from 215 UK FfSE-350 index companies and 1675 firm years for the period 2004-20 11 has been used to examine the effect of large set of corporate governance mechanisms on constraining earnings management. Based on the agency theory, we hypothesise that corporate governance mechanisms can inhibit managers from engaging in opportunistic earnings management practices. We use two proxies for earnings management: current discretionary accruals measured by performance adjusted model developed by Kothari et al. (2005) and total discretionary accruals as measured by the modified Jones model developed by Dechow et al. (I995). We find that audit related mechanisms, such as audit committee's size, independence, and expertise as well as external audit efforts and quality (measured through audit fees), have a significant negative relationship with earnings management. Moreover, we find that non-audit fees have a significant positive effect on earnings management - supporting the argument that non-audit fees negatively affect an auditor's independence. Conversely, we find that board size and independence have moderate negative relationship with earnings management. To answer the second and third research questions, a panel data set drawn from 1675 Chief Executive Officer (CEO) year observations and 1540 Chief Financial Officer (CFO) year observations has been used to examine the relationship between CEO and CFO equity incentives and earnings management. In addition, we examine the moderation effect of corporate governance mechanisms on the relationship between executives' equity incentives and earnings management. Based on the managerial power approach, the current thesis hypothesises a positive association between executives' equity incentives and earnings management.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID: uk.bl.ethos.599994  DOI: Not available
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