Corporate Governance and Earnings Management: Does Family Matter?

Abstract

This article examines the impact of corporate governance mechanism dimensions on earnings management in family and non-family firms listed in Pakistan from 2011 to 2019. Earnings management is proxied by accrual earnings management and measured by Performance Matched Jones Model. Two way clustered ordinary least square technique is used to estimate the coefficients of four corporate governance mechanism dimensions. Further, t-test is used to compare the coefficients of governance mechanism dimensions for family and non-family firms. Results of the study show that corporate governance mechanism dimensions play significant role in reducing earnings management. But in family firms the impact is insignificant, except for board size. Furthermore, results also suggest that the impact of corporate governance mechanism dimensions is significantly different on family and non-family firms.