The Influence of Monitoring Mechanisms and Opportunistic Behaviors Toward Earnings Management

  • Aziani Idris
  • Zuraidah Mohd Sanusi
  • Mohd Taufik Mohd Suffian
Conference paper
Part of the Springer Proceedings in Business and Economics book series (SPBE)

Abstract

Corporate collapse which resulted from financial scandals keeps increasing in numbers. This study examines the influence of monitoring mechanisms and opportunistic behaviors toward earnings management (EM). Discretionary accrual is a proxy of EM in this study. Monitoring behaviors are proxied by two variables named leverage and dividend. Opportunistic behaviors are proxied by free cash flow (FCF) and profitability (ROA). 481 companies listed in Bursa Malaysia were collected, while another 401 public companies were collected from the Australian Stock Exchange. Several statistical analyses were carried out to examine the influence of monitoring mechanisms (leverage and dividend) and opportunistic behaviors (free cash flow and profitability) toward EM. The findings of this study revealed that only opportunistic behaviors have significant influence on EM in Malaysia. However, for Australia, the result indicated that only one determinant of monitoring mechanisms (dividend) has significant relationship with EM. The same goes to opportunistic behaviors, which indicated that only FCF has significant relationship with EM. For pool data countries, the result revealed that the hypotheses were also partially supported by both monitoring mechanisms and opportunistic behaviors toward EM.

Keywords

Monitoring mechanism Opportunistic behaviors Leverage Dividend Free cash flow Profitability Earnings management 

Notes

Acknowledgment

We would like to thank the Accounting Research Institute (ARI) and the Research Management Institute (RMI), Universiti Teknologi MARA (UiTM), in collaboration with the Ministry of Education Malaysia (MoE), for providing support for this research project. We are indeed very grateful for the grant; without which, we would not be able to carry out the research.

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Copyright information

© Springer Science+Business Media Singapore 2015

Authors and Affiliations

  • Aziani Idris
    • 1
  • Zuraidah Mohd Sanusi
    • 2
  • Mohd Taufik Mohd Suffian
    • 3
  1. 1.Universiti Teknologi Mara (UiTM) & Accounting Research Institute (ARI)Shah AlamMalaysia
  2. 2.Accounting Research Institute (ARI) & Universiti Teknologi Mara (UiTM)Shah AlamMalaysia
  3. 3.Universiti Teknologi Mara (UiTM) & Accounting Research Institute (ARI)PerakMalaysia

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