Corporate Governance Characteristics and Earnings Management: Empirical Evidence from Chinese Listed Firms

M. Awais Gulzar, wang zongjun


The purpose of this paper is to investigate the efficiency of corporate governance characteristics in reducing earnings management among the listed firms of Shanghai and Shenzhen stock exchange, China. We took abnormal working capital accruals as a proxy for earning management. In this paper, we used modified Jones Model in order to calculate discretionary accruals (DAC). The sample comprises of 1009 firms over the period of 4 years from 2002 to 2006. The study essentially shows that the corporate governance characteristics play a vital role in reducing the earning management. We found a significantly positive association between earning management and different corporate governance characteristics such as CEO duality, board meetings, females directors and concentrated ownership. We lacked evidences to find relationship between board size, director’s shareholdings and proportion of independent directors with DAC as well as between the presence of audit committee and DAC. These studies will broaden the scope of the relationship between earning management and corporate governance characteristics. Very few studies have been conducted in this area especially for the Chinese listed firms with empirical evidences given. A variety of corporate governance variables are used especially board sex ratio in this analysis.

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Copyright (c) 2011 M. Awais Gulzar, wang zongjun

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International Journal of Accounting and Financial Reporting  ISSN 2162-3082

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