• Corporate Governance;
  • Audit Committee;
  • Board of Directors;
  • Ownership Issues;
  • Ownership Structure;
  • Earnings Management;
  • Agency Theory;
  • Meta-Analysis


Manuscript Type: Review

Research Question/Issue: The goal of this paper is to meta-analyze the results of 35 studies that examine the effect on earnings management of firms' boards of directors and ownership structure. We examine whether differences in results are attributable to moderating effects related to the system of corporate governance, the measurement of the governance variable, or the particular specifications of discretionary accruals models.

Research Findings/Insights: The findings show that the variation in the results of previous studies on CEO duality and audit committee independence are caused by sampling error. In addition, the measurement of dependent variable, discretionary accruals, and the corporate governance system moderate the association between earnings management and some corporate governance variables.

Theoretical/Academic Implications: The measurement of variables, especially discretionary accruals, influences the findings found in previous studies. The findings emphasize the need to explicitly consider the legal and institutional setting when one analyzes the effect of mechanisms of corporate governance on discretionary accruals. Future research should include matrix correlations, and consider detailed measures of earnings management and more attributes of boards of directors in order to facilitate research using meta-analysis.

Practitioner/Policy Implications: The results suggest that board independence, board size, and audit committee independence can improve investor confidence by constraining earnings management. Additional empirical evidence regarding refined measures of ownership and board, specifically board independence, would be very useful in gaining greater understanding of how the different approaches to these constructs influence earnings management.