The impact of board characteristics on the extent of earnings management: conditional evidence from quantile regressions

Usman, Muhammad, Nwachukwu, Jacinta and Ezeani, Ernest ORCID: https://orcid.org/0000-0003-0401-9000 (2022) The impact of board characteristics on the extent of earnings management: conditional evidence from quantile regressions. International Journal of Accounting and Information Management, 30 (5). pp. 600-616. ISSN 1834-7649

Preview

Accepted Version Available under License Creative Commons Attribution Non-commercial. Download (428kB) | Preview

Abstract

Purpose -This paper examines the impact of board characteristics on earnings management among UK non-financial firms. Methodology - Using a sample of the UK FTSE 350 firms from 2010 till 2019, we investigated the relationship between board characteristics (board size, board gender diversity, board tenure, board independence, CEO-duality, board meetings) and earnings management by using quantile regression technique. Findings - We found a non-linear association between board characteristics and discretionary accrual. The empirical evidence showed that board mechanisms reduce the extent of earnings manipulation among UK firms with higher discretionary accruals than firms with low and medium discretionary accruals levels. Implications - Our results will benefit UK firms by helping them to rethink their board composition. It will also help policymakers understand how the corporate board can help ensure the quality of financial reports. Originality/value – We used the quantile regression approach, which helps to clarify the mixed findings of prior studies that used conventional regression techniques.