ISSN: 2222-6990
Open access
This paper examines the impact of both, family affiliation and related party transactions tunneling from real activities-based manipulation mediated by audit committee independence based on sample listed non-financial firms Nigeria from 2011 to 2017. The data were obtained from Thomson Reuters DataStream and financial reports of firms. The fixed effects, random effects (GLS), and the generalized method of moments (GMM) were used for panel data regression analysis using the firm internal governance and real earnings management. The findings showed that audit committee independence mediates the relationship between firm internal governance and real earnings management. The results confirm some previous literature that the monitoring role of the affiliated family firms is crucial in mitigating the opportunistic behavior of managers in engaging in real activities manipulation and ensures the earnings quality. However, the analysis of the related party transaction revealed the negative impact on transparency that entrenched managers utilized related parties as a means of tunneling and drained the minority shareholder's interest for the benefit of majority shareholders. In this case, we observed that as family ownership increases, managers engage less in value-destroying behavior because founding family members want to retain trans-generational legacies and care not about short term benefits. Further analysis revealed that leverage has positively impacted on the earnings quality while the firm size was less effective in deterring real earnings manipulation.
Abubakar, M. (2016). Effect of Audit Quality and Corporate Governance on Real Activities Manipulation in Nigerian Banks. Proceedings of the 6th Economic & Finance Conference, (September), 1–26. https://doi.org/10.20472/EFC.2016.006.001
Achleitner, A. K., Günther, N., Kaserer, C., & Siciliano, G. (2014). Real Earnings Management and Accrual-based Earnings Management in Family Firms. European Accounting Review, 23(3), 431–461. https://doi.org/10.1080/09638180.2014.895620
Adamu, A. I., Ishak, R. B., & Chandren, S. A. (2017). The Effect of Board Attributes on Real Earnings Management in Nigerian Financial Institutions. Journal of Accounting, Business and Finance Research, 1(1), 76–83. https://doi.org/10.20448/2002.11.76.83
Al-shattarat, B. (2017). Real Earnings Management Activities , Meeting Earnings Benchmarks and Future Performance?: UK evidence, University of Plymouth PhD Theses available at https://pearl.plymouth.ac.uk
Almeida?Santos, S., Andréia, C. D., Débora, G. M., & Nayane, T. K. (2013). Influence of family control in the practice of earnings management. Management Research: Journal of the Iberoamerican Academy of Management, 11(1), 77–99. https://doi.org/10.1108/1536-541311318080
Andres, C. (2008). Large shareholders and firm performance An empirical examination of founding-family ownership ?, 14, 431–445. https://doi.org/10.1016/j.jcorp
Atu, O. E., Osaretin, K., Manager, A., & Osaretin, C. (2016). Determinants of Earnings Management in Nigerian Quoted Companies. Igbinedion University Journal of Accounting, 1(1), 118–133. Retrieved from https://www.iuokada.edu.ng/journals/791F85C39126667
Baltagi, B. H. (2005). Econometric Analysis of Panel Data (Third edit). West Sussex, England: John Wiley & Sons, Ltd.
Baltagi, B. H. (2010). Unbalanced Panel Data Models. Introduction to Unbalanced Panel Data Models with Stata, 1–19.
Baron, R. M., & Kenny, D. A. (1986). The Moderator-Mediator Variable Distinction in Social Psychological Research?: Conceptual , Strategic , and Statistical Considerations, 51(6), 1173–1182.
Becker, C. L., Defond, M. L., & California, S. (1998). The Effect of Audit Quality on Earnings Management *, 15(1), 1–24.
Bhaumik, S., Gregoriou, A., & Kumar Bhaumik, S. (2009). Family Ownership, Tunneling and Earnings Management: A review of the literature http://ssrn.com/abstract=1488917
Bonacchi, Massimiliano Fabrizio, C. P. Z. (2017). Parent use of Subsidiary to push down Earnings management. ARPN Journal of Engineering and Applied Sciences, 12(10), 3218–3221. https://doi.org/10.1111/ijlh.12426
Cascino, S., Pugliese, A., Mussolino, D., & Sansone, C. (2010). The Influence of Family Ownership on the Quality of Accounting Information. Family Business Review, 23(3), 246–265. https://doi.org/10.1177/0894486510374302
Chen, J., Cheng, P., & Xiao, X. (2011). Related party transactions as a source of earnings management. Applied Financial Economics, 21(3), 165–181. https://doi.org/10.1080/09603107.2010.528361
Chen, T.-Y., Gu, Z., Kubota, K., & Takehara, H. (2015). Accrual-Based and Real Activities Based Earnings Management Behavior of Family Firms in Japan. The Japanese Accounting Review, 5(2015), 21–47. https://doi.org/10.11640/tjar.5.2015.02
Cheng, Q. (2014). Family firm research – A review q. China Journal of Accounting Research. https://doi.org/10.1016/j.cjar.2014.03.002
Cho, S., & Lim, K. M. (2018). Tunneling by Related-party Transactions: Evidence from Korean Conglomerates. Asian Economic Journal, 32(2), 147–164. https://doi.org/10.1111/asej.12146
Choi, A., Sohn, B. C., & Yuen, D. (2018). Do auditors care about real earnings management in their audit fee decisions? Asia-Pacific Journal of Accounting and Economics, 25(1–2), 21–41. https://doi.org/10.1080/16081625.2016.1231580
Cohen, D. A., & Zarowin, P. (2008). Economic Consequences of Real and Accrual-Based Earnings Management Activities. Working Paper, New York University.
Dechow, P. M., & Skinner, D. J. (2000). Earnings Management?: Reconciling t
In-Text Citation: (Ibrahim et al., 2020)
To Cite this Article: Ibrahim, G., Mansor, N., & Nasidi, M. (2020). Mediating Effect of Audit Committee Independence on the Link Between Firms Internal Governance Tunneling from Real Earnings Management. International Journal of Academic Research in Business and Social Sciences, 10(2), 195–211.
Copyright: © 2020 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode