The Dynamic Endogeneity Issue between Corporate Ownership Structure and Real-Based Earnings Manipulation in an Emerging Market: Advanced Dynamic Panel Model
This study aims to contribute to the existing literature by examining the relationship between corporate governance (CG) attributes and real-based earnings management (REM) in the context of an emerging market economy. The study employs a sample of 78 Egyptian Exchange (EGX)-listed companies coverin...
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| Format: | Article |
| Language: | English |
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MDPI AG
2023-10-01
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| Series: | Risks |
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| Online Access: | https://www.mdpi.com/2227-9091/11/11/189 |
| _version_ | 1797457829103140864 |
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| author | Eman Fathi Attia Messaoud Mehafdi |
| author_facet | Eman Fathi Attia Messaoud Mehafdi |
| author_sort | Eman Fathi Attia |
| collection | DOAJ |
| description | This study aims to contribute to the existing literature by examining the relationship between corporate governance (CG) attributes and real-based earnings management (REM) in the context of an emerging market economy. The study employs a sample of 78 Egyptian Exchange (EGX)-listed companies covering the period from 2008 to 2017, yielding a total of 780 observations. To address dynamic endogeneity concerns between CG mechanisms and REM, the dynamic panel system-generalized method of moments (SGMM) estimator is used as the main analytical tool. The findings reveal that managerial and family ownership are negatively and significantly correlated with REM proxies, except for the ABCFO measure. By contrast, government and institutional ownership exhibit contrasting results, depending on the REM proxies used. The CG-EM relationship is influenced by several conflicting theoretical perspectives, including agency theory, institutional theory, stewardship theory, and resource dependence theory, resulting in inconsistent empirical findings. To the best of the authors’ knowledge, this study is the first to detect Real-earnings manipulation practices (REM) in the Egyptian context using six models to confirm the validity, reliability, and robustness of the findings. Additionally, the study employs an advanced statistical technique that considers endogeneity, heteroscedasticity, and simultaneity in the relationship between CG mechanisms and earnings quality. The results highlight the importance of considering the institutional and legal context of a country when analyzing the impact of corporate governance mechanisms on earnings quality, as the practice and implementation of governance mechanisms vary across countries. |
| first_indexed | 2024-03-09T16:28:30Z |
| format | Article |
| id | doaj.art-7a4afece9833477499f213a3ec574169 |
| institution | Directory Open Access Journal |
| issn | 2227-9091 |
| language | English |
| last_indexed | 2024-03-09T16:28:30Z |
| publishDate | 2023-10-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Risks |
| spelling | doaj.art-7a4afece9833477499f213a3ec5741692023-11-24T15:04:56ZengMDPI AGRisks2227-90912023-10-01111118910.3390/risks11110189The Dynamic Endogeneity Issue between Corporate Ownership Structure and Real-Based Earnings Manipulation in an Emerging Market: Advanced Dynamic Panel ModelEman Fathi Attia0Messaoud Mehafdi1Accounting Department, College of Business and Administration, University of Business and Technology, Jeddah 21448, Saudi ArabiaAccounting Department, Business School, Huddersfield University, Huddersfield HD1 3DH, UKThis study aims to contribute to the existing literature by examining the relationship between corporate governance (CG) attributes and real-based earnings management (REM) in the context of an emerging market economy. The study employs a sample of 78 Egyptian Exchange (EGX)-listed companies covering the period from 2008 to 2017, yielding a total of 780 observations. To address dynamic endogeneity concerns between CG mechanisms and REM, the dynamic panel system-generalized method of moments (SGMM) estimator is used as the main analytical tool. The findings reveal that managerial and family ownership are negatively and significantly correlated with REM proxies, except for the ABCFO measure. By contrast, government and institutional ownership exhibit contrasting results, depending on the REM proxies used. The CG-EM relationship is influenced by several conflicting theoretical perspectives, including agency theory, institutional theory, stewardship theory, and resource dependence theory, resulting in inconsistent empirical findings. To the best of the authors’ knowledge, this study is the first to detect Real-earnings manipulation practices (REM) in the Egyptian context using six models to confirm the validity, reliability, and robustness of the findings. Additionally, the study employs an advanced statistical technique that considers endogeneity, heteroscedasticity, and simultaneity in the relationship between CG mechanisms and earnings quality. The results highlight the importance of considering the institutional and legal context of a country when analyzing the impact of corporate governance mechanisms on earnings quality, as the practice and implementation of governance mechanisms vary across countries.https://www.mdpi.com/2227-9091/11/11/189corporate governanceearnings managementemerging marketdynamic panel modelendogeneity |
| spellingShingle | Eman Fathi Attia Messaoud Mehafdi The Dynamic Endogeneity Issue between Corporate Ownership Structure and Real-Based Earnings Manipulation in an Emerging Market: Advanced Dynamic Panel Model Risks corporate governance earnings management emerging market dynamic panel model endogeneity |
| title | The Dynamic Endogeneity Issue between Corporate Ownership Structure and Real-Based Earnings Manipulation in an Emerging Market: Advanced Dynamic Panel Model |
| title_full | The Dynamic Endogeneity Issue between Corporate Ownership Structure and Real-Based Earnings Manipulation in an Emerging Market: Advanced Dynamic Panel Model |
| title_fullStr | The Dynamic Endogeneity Issue between Corporate Ownership Structure and Real-Based Earnings Manipulation in an Emerging Market: Advanced Dynamic Panel Model |
| title_full_unstemmed | The Dynamic Endogeneity Issue between Corporate Ownership Structure and Real-Based Earnings Manipulation in an Emerging Market: Advanced Dynamic Panel Model |
| title_short | The Dynamic Endogeneity Issue between Corporate Ownership Structure and Real-Based Earnings Manipulation in an Emerging Market: Advanced Dynamic Panel Model |
| title_sort | dynamic endogeneity issue between corporate ownership structure and real based earnings manipulation in an emerging market advanced dynamic panel model |
| topic | corporate governance earnings management emerging market dynamic panel model endogeneity |
| url | https://www.mdpi.com/2227-9091/11/11/189 |
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