Board of directors and opportunistic earnings management: Evidence from India

Journal of Accounting, Auditing and Finance

Volumn 23, Issue 4, 2008, Pages 517-551

  Sarkar, Jayati ^a   Sarkar, Subrata ^a   Sen, Kaustav ^b  

^a INDIRA GANDHI INSTITUTE OF DEVELOPMENT RESEARCH   (India)

^b PACE UNIVERSITY   (United States)

Author keywords

Board of directors; Corporate governance; Earnings management; Institutional investors

Indexed keywords

EID: 54149095772     PISSN: 0148558X     EISSN: None     Source Type: Journal    
DOI: 10.1177/0148558X0802300405     Document Type: Article

References (79)

1. ACCA (Association of Chartered Certified Accountants). 2007. India: International Accounting and the Future. London: ACCA.
2. Anderson, R., and D. Reeb. 2003. "Founding-family Ownership and Firm Performance: Evidence from the S&P 500." Journal of Finance 53: 1301-1328.
3. Baker, T., D. Collins, and A. Reitenga. 2003. "Stock Option Compensation and Earnings Management Incentives." Journal of Accounting, Auditing and Finance 18 (4): 557-582.
4. Ball, R., and P. Brown. 1968. "An Empirical Evaluation of Accounting Income Numbers." Journal of Accounting Research 6: 159-177.
5. Ball, R., and S. Kothari. 1991. "Security Returns around Earnings Announcements." The Accounting Review 66: 718-738.
6. Balsam, S. 1998. "Discretionary Accounting Choices and CEO Compensation." Contemporary Accounting Research 15 (3): 229-252.
7. Barton, J., and P. Simko. 2002. "The Balance Sheet as an Earnings Management Constraint." The Accounting Review 77 (Supplement): 1-27.
8. Bartov, E., F. A. Gul, and J. Tsui. 2000. "Discretionary-Accruals Models and Audit Qualifications." Journal of Accounting and Economics (December): 421-452.
9. Beasley, M. S. 1996. "An Empirical Analysis of the Relation between the Board of Director Composition and Financial Statement Fraud." The Accounting Review 71: 307-340.
10. Bedard, J., S. M. Chtourou, and L. Courteau. 2004. "The Effect of Audit Committee Expertise, Independence and Activity on Aggressive Earnings Management." Auditing: A Journal of Practice and Theory 23 (2): 13-35.
11. Bertrand, M., P. Mehta, and S. Mullainathan. 2002. "Ferreting out Tunneling: An Application to Indian Business Groups." Quarterly Journal of Economics (February): 121-148.
12. Bhagat, S., and Bernard Black. 2002. "The Non-correlation between Board Independence and Long-term Firm Performance." The Journal of Corporation Law 27: 231-273.
13. Bhattacharya, U., H. Daouk, and M. Welker. 2003. "The World Price of Earnings Opacity." Accounting Review 78 (3): 641-678.
14. Brickley, J., J. Coles, and G. Jarrell. 1997. "Leadership Structure: Separating the CEO and Chairman of the Board." Journal of Corporate Finance 3: 189-220.
15. Burgstahler, D., and M. Eames. 2003. "Earnings Management to Avoid Losses and Small Decreases: Are Analysts' Fooled?" Contemporary Accounting Research 20: 253-294.
16. Bushman, R., Q. Chen, E. Engel, and A. Smith. 2004. "Financial Accounting Information, Organizational Complexity and Corporate Governance Systems." Journal of Accounting and Economics 37: 167-201.
17. Bushman, R., and A. Smith. 2001. "Financial Accounting Information and Corporate Governance." Journal of Accounting and Economics 32: 237-333.
18. Carcello, J., D. R. Hermanson, T. L. Neal, and R. Riley, Jr. 2002. "Board Characteristics and Audit Fees." Contemporary Accounting Research (Autumn): 365-384.
19. Carney, M., and E. Gedajlovic. 2002. "The Coupling of Ownership and Control and the Allocation of Financial Resources: Evidence from Hong Kong." Journal of Management Studies 39 (1): 123-146.
20. Chagnati, R. S., V. Mahajan, and S. Sharma. 1985. "Corporate Board Size, Composition and Corporate Failures in Retailing Industry." Journal of Management Studies 22: 400-417.
21. Chandrasekhar, C. P., and J. Ghosh. 2005. "New Features of the Stock Market Surge," The Hindu Business Line, December 20. http://www. thehindubusinessline.com/2005/12/20/stories/2005122001301100.htm.
22. Chung, R., M. Firth, and J. Kim. 2002. "Institutional Monitoring and Opportunistic Earnings Management." Journal of Corporate Finance 8: 1, 29-48.
23. Cremers, K. J. M., and V. Nair. 2003. "Governance Mechanisms and Equity Prices." Journal of Finance 60 (6): 2859-94.
24. Dahya, J., and J. McConnell. 2003. "Board Composition, Corporate Performance, and the Cadbury Committee Recommendation." Working Paper No. 2003-003, Purdue University.
25. DCA (Department of Company Affairs). 2002. "Report of the Committee on Corporate Audit and Governance." Department of Company Affairs, Government of India. http://dca.nic.in/naresh/index.htm.
26. Dechow, P., and I. Dichev. 2002. "The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors." The Accounting Review 77 (Supplement): 35-39.
27. Dechow, P. M., R. G. Sloan, and A. P. Sweeney. 1995. "Detecting Earnings Management." The Accounting Review 70: 193-225.
28. Dechow, P. M., R. G. Sloan, and A. P. Sweeney. 1996. "Causes and Consequences of Earnings Manipulation: An Analysis of Firms Subject to Enforcement Actions by the SEC." Contemporary Accounting Research 13 (1): 1-36.
29. DeFond, M., and K. R. Subramanyam. 1998. "Auditor Changes and Discretionary Accruals." Journal of Accounting and Economics 25: 35-67.
30. Fagernas, S. 2007. "How Do Family Ties, Boards and Regulation Affect Pay at the Top? Evidence for Indian CEOs." Working Paper, University of Cambridge.
31. Fama, E. F. 1980. "Agency Problems and the Theory of the Firm." Journal of Political Economy 88: 715-732.
32. Fama, E. F., and M. Jensen. 1983. "Separation of Ownership and Control." Journal of Law and Economics 26: 301-325.
33. Fan, J., and T. J. Wong. 2002. "Corporate Ownership Structure and the Informativeness of Accounting Earnings in East Asia." Journal of Accounting and Economics 33: 401-425.
34. Ferris, S., M. Jagannathan, and A. C. Pritchard. 2003. "Too Busy to Mind Business? Monitoring by Directors with Multiple Board Appointments." Journal of Finance 58 (3): 1087-1111.
35. Francis, J., R. LaFond, P. Olsson, and K. Schipper. 2005. "The Market Pricing of Accruals Quality." Journal of Accounting and Economics 39: 295-327.
36. Frankel, R., M. F. Johnson, and K. K. Nelson. 2002. "The Relation between Auditors' Fees for Non-audit Services and Earnings Management." The Accounting Review. Special Issue on Quality of Earnings, October (Supplement): 71-105.
37. Friedman, E., S. Johnson, and T. Mitton. 2003. "Propping and Tunneling." Journal of Comparative Economics 31 (4): 732-750.
38. Ghosh, A. 2006. "Determination of Executive Compensation in an Emerging Economy: Evidence from India." Emerging Markets Finance and Trade 42 (3): 66-90.
39. GOI (Government of India ). 2006. Press Note on Presentation of Recommendations on Accounting Standards by Chairman, National Advisory Committee on Accounting Standards (NACAS) to the Central Government, Ministry of Company Affairs, Government of India, http://dca.nic.in/press_note_1_2k6.htm.
40. Gomes-Mejia, L., M. Larraza-Kintana, and M. Makri. 2003. "The Determinants of Executive Compensation in Family-Controlled Public Corporations." Academy of Management Journal 46: 226-237.
41. Haw, I., B. Hu, L. Hwang, and W. Wu. 2004. "Ultimate Ownership, Income Management and Legal and Extra-Legal Institutions." Journal of Accounting Research 42 (2): 423-62.
42. Healy, P. M. 1985. "The Effect of Bonus Schemes on Accounting Decisions." Journal of Accounting and Economics 1: 85-107.
43. Healy, P. M., and J. M. Wahlen. 1999. "A Review of the Earnings Management Literature and its Implications for Standard Setting." Accounting Horizons December: 365-383.
44. Jian, M., and T. J. Wong. 2003. "Earnings Management and Tunnelling through Related Party Transactions: Evidence from Chinese Corporate Groups." Working Paper, The Hong Kong University of Science and Technology.
45. Johnson, S., P. Boone, A. Breach, and E. Friedman. 2000. "Corporate Governance in the Asian Financial Crisis." Journal of Financial Economics 58: 141-186.
46. Jones, J. 1991. "Earnings Management during Import Relief Investigation." Journal of Accounting Research 29: 193-228.
47. Kasznik, R. 1999. "On the Association between Voluntary Disclosure and Earnings Management." Journal of Accounting Research 37 (1): 57-81.
48. Khanna, T., and K. Palepu. 2000. "Emerging Market Business Groups, Foreign Investors and Corporate Governance." In NBER Volume on Concentrated Ownership, ed. Randall Morck. Illinois: University of Chicago Press.
49. Kim, V. J., and C. H. YI. 2005. "Ownership Structure, Business Group Affiliation, Listing Status, and Earnings Management: Evidence from Korea." Working paper, Hong Kong Polytechnic University School of Accounting and Finance.
50. Klein, A. 2002. "Audit Committee, Board of Director Characteristics, and Earnings Management." Journal of Accounting and Economics 33 (3): 375-400.
51. Kothari, S. P. 2001. "Capital Markets Research in Accounting." Journal of Accounting and Economics 31: 105-231.
52. Kothari, S. P., A. Leone, and C. Wasley. 2005. "Performance Matched Discretionary Accrual Measures." Journal of Accounting and Economics 39: 163-197.
53. Kurtzman, J., G. Yago, and T. Phumiwasana. 2004. "The Global Costs of Opacity: Measuring Business and Investment Risk Worldwide." MIT Sloan Management Review 46 (1): 38-44.
54. Larcker, D., and S. Richardson. 2004. "Fees Paid to Audit Firms, Accrual Choices and Corporate Governance." Journal of Accounting Research 42 (June): 625-658.
55. Leuz, C., D. Nanda, and P. Wysocki, P. 2003. "Earnings Management and Investor Protection: An International Comparison." Journal of Financial Economics 69: 505-527.
56. Lipton, M., and J. Lorsch. 1992. "A Modest Proposal for Improved Corporate Governance." Business Lawyer 48(1): 59-77.
57. McNichols, M., and P. Wilson. 1988. "Evidence of Earnings Management from the Provision for Bad Debts." Journal of Accounting Research 26 (Supplement): 1-31.
58. Mishra, R. 2005. "Serious Fraud Office Moves Court against Daewoo Motors India," The Hindu Business Line, February 15. http://www. thehindubusinessline.com/2005/02/15/stories/2005021502580200.htm.
59. Mishra, R. 2006. "Serious Fraud Office for prosecuting DSQ Soft," The Hindu Business Line, April 26. http://www.thehindubusinessline. com/2006/04/26/stories/2006042603700900.htm.
60. Mitra, S., and W. Cready. 2005. "Institutional Stock Ownership, Accrual Management, and Information Environment." Journal of Accounting, Auditing and Finance 20 (30): 257-265.
61. Mitton, T. 2002. "A Cross-Firm Analysis of the Impact of Corporate Governance on the East Asian Financial Crisis." Journal of Financial Economics 64: 215-241.
62. Narayanswamy, R. 2006. "Gobalisation and Indian Accounting Standards." The Chartered Accountant (January 6): 962-974.
63. Park, Y., and H. Shin. 2004. "Board Composition and Earnings Management in Canada." Journal of Corporate Finance: Contracting, Governance, and Organization 10 (3): 431-457.
64. Peasnell, K. V., P. F. Pope, and S. Young. 2005. "Board Monitoring and Earnings Management: Do Outside Directors Influence Abnormal Accruals?" Journal of Business Finance and Accounting 32 (7-8): 1311-1346.
65. Peng, M. W. 2004. "Outside Directors and Firm Performance during Institutional Transitions." Strategic Management Journal 25: 435-471.
66. Pi, L., and S. G. Timme. 1993. "Corporate Control and Bank Efficiency." Journal of Banking and Finance 20 (2-3): 515-530.
67. Prasad Murali, S. A. 2002. "Actuals About Standards," The Hindu Business Line, September 30. Available online at: http://www. thehindubusinessline.com/mentor/2002/09/30/stories/2002023001071100.htm.
68. Ramachandran, G., and C. Ramesh. 2004. "MAT Strengthens India Inc.," The Hindu Business Line, March 19. http://www.thehindubusinessline. com/2004/03/19/stories/2004031900030800.htm.
69. Rechner, P. L., and D. R. Dalton. 1991. "CEO Duality and Organizational Performance: A Longitudinal Analysis." Strategic Management Journal 12 (2): 155-160.
70. Sarkar, J., and S. Sarkar. 2000. "Large Shareholder Activism in Corporate Governance in Developing Countries: Evidence from India." international Review of Finance 1 (3): 161-194.
71. Sarkar, J., and S. Sarkar. 2005. "Multiple Board Appointments and Firm Performance in Emerging Economies: Evidence from India." Working Paper 2005-001, Indira Gandhi Institute of Development Research.
72. SEBI (The Securities Exchange Board of India). 2005. Annual Report, 2004-05.
73. Subba-Reddy, Y. 2004. "Seasoned Capital Offerings: Earnings Management and Long-Run Operating Performance of Indian Firms." Completed Research Paper No. 35, September, National Stock Exchange, Mumbai, India, http://www.nse-india.com/.
74. Teoh, S. H., I. Welch, and T. J. Wong. 1998. "Earnings Management and the Long-run Market Performance of Initial Public Offerings." Journal of Finance 53: 1935-1974.
75. Warfield, T., J. Wild, and K. Wild. 1995. "Managerial Ownership, Accounting Choices, and Informativeness of Earnings." Journal of Accounting and Economics 20 (1): 61-91.
76. World Bank. 2004. "Report on the Observance of Standards and Codes: India Accounting and Auditing." World Bank, Washington, DC.
77. Xie, B., W. N. Davidson III, and P. J. DaDalt. 2003. "Earnings Management and Corporate Governance: The Roles of the Board and the Audit Committee." Journal of Corporate Finance 9 (3): 295-316.
78. Yeh, Y., and T. Woidtke. 2005. "Commitment or Entrenchment? Controlling Shareholders and Board Composition." Journal of Banking & Finance 29: 1857-1885.
79. Young, S. 2000. "The Increasing Use of Non-executive Directors: Its Impact on UK Board Structure and Corporate Arrangements." Journal of Business, Finance and Accounting 27 (9-10): 1311-42.