Earnings Management and Corporate Governance

Abstract

This paper studies the relationship between different corporate governances mechanisms and earnings management. It examines two categories of governance devices; internal (ownership concentration and board structure) and external (take-over pressure and institutional ownership). Controlling for other characteristics, I find that firms with stronger internal governance, such as higher ownership concentration and smaller boards, manager earnings more, while firms with stronger external governance, such as higher institutional holdings and high take over pressure, manage earnings less.