The Impact of Corporate Governance Mechanisms on Earnings Management Practices in Publicly Listed Firms

Posted: Dec 16, 2006

• Charlotte Hernandez
• Charlotte Jones
• Chloe Adams

Abstract

The relationship between corporate governance and earnings management represents a fundamental area of inquiry in accounting and finance research. Earnings management, defined as the strategic manipulation of financial reports within the boundaries of accounting standards to achieve specific objectives, has significant implications for market efficiency, investor protection, and corporate accountability. While extensive literature has examined various governance mechanisms as potential constraints on earnings management, the results remain inconclusive and often contradictory. This study addresses these limitations by introducing a novel methodological approach that combines computational linguistics with traditional governance analysis to provide deeper insights into how corporate governance structures influence financial reporting practices. Traditional research in this domain has primarily focused on quantitative metrics such as board composition, audit committee characteristics, and ownership structures. However, these approaches often fail to capture the nuanced interactions and informal dynamics that characterize actual governance processes.