The effect of multiple directorships on real and accrual-based earnings management: evidence from Saudi listed firms

Kais Baatour, Hakim Ben Othman, Khaled Hussainey

    Research output: Contribution to journalArticlepeer-review

    625 Downloads (Pure)

    Abstract

    Purpose - The study examines the effect of multiple directorships on accrual-based earnings management and real earnings management. It analyses whether earnings management practices in the Saudi context increase or decrease with the average number of multiple directorships.

    Design/methodology/approach – The study uses Roychowdhury (2006)’s approach to capture the level of real earnings management and employs Jones (1991)’s cross-sectional model to measure accrual-based earnings management.

    Findings – The paper provides partial evidence supporting the “busyness” hypothesis where earnings management practices increase with the number of multiple directorships. The evidence shows that multiple directorships have a positive and significant effect on real earnings management in the Kingdom of Saudi Arabia. However, we find no significant impact of multiple directorships on accrual-based earnings management.

    Originality/value – This is the first study that empirically investigates the relationship between multiple directorships and earnings management in the Kingdom of Saudi Arabia. The paper contributes to the limited literature on multiple directorships in developing countries by examining their impact on opportunistic real earnings management.
    Original languageEnglish
    Pages (from-to)395-412
    JournalAccounting Research Journal
    Volume30
    Issue number4
    Early online date8 Nov 2017
    DOIs
    Publication statusPublished - Nov 2017

    Keywords

    • Accrual-based earnings management
    • real earnings management
    • Saudi Arabia
    • multiple directorships
    • busyness hypothesis
    • reputation hypothesis

    Fingerprint

    Dive into the research topics of 'The effect of multiple directorships on real and accrual-based earnings management: evidence from Saudi listed firms'. Together they form a unique fingerprint.

    Cite this