By Appearance and/or by Amount: The Impact of Presence and Size of Audit Committees on Real Earnings Management in Bangladesh
Nitai Chandra Debnath1, B. C. M. Patnaik2, Ipseeta Satpathy3
1DNitai Chandra Debnath, Research Scholar, Kalinga Institute of Industrial Technology (KIIT) and Associate Professor, Bangladesh Institute of Capital Market, Dhaka, Bangladesh.
2B. C. M. Patnaik, Associate Professor, School of Management, KIIT, Bhubaneswar, India.
3Ipseeta Satpath, Professor, School of Management, KIIT, Bhubaneswar, India.
Manuscript received on 08 June 2019 | Revised Manuscript received on 13 June 2019 | Manuscript Published on 08 July 2019 | PP: 100-107 | Volume-8 Issue-8S3 June 2019 | Retrieval Number: H10250688S319/19©BEIESP
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© The Authors. Blue Eyes Intelligence Engineering and Sciences Publication (BEIESP). This is an open-access article under the CC-BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)
Abstract: In this study, we analyze how the presence and size of audit committees are interrelated to real earnings management empirically in the context of Bangladesh. To accomplishour study, we utilize a sample of 2191 firm year observations listed on the Dhaka Stock Exchange throughout the period of 2000-2017. Our study ascertains that the size of audit committeesisnegatively associated with real earnings management. Results also demonstrate that all three composite measures of real earnings management are negatively associated with the size of audit committees. More specifically, large audit committee are more capable of restraining managers from real earnings management practices through changing discretionary expenses. On the other hand, presence of audit committees is also negatively associated with real earnings management Though this association is not statistically significant. It indicates that the presence of audit committees will not improve the situation considerably; rather, experience, diversification, size, and independence may offer opportunities for positive changes. Regulators may be aware of this and change the provision of audit committee formation accordingly
Keywords: Audit committee, Audit committee size, Real earnings management, Corporate governance
Scope of the Article: Authentication, Authorization, Accounting