Original scientific paper

https://doi.org/10.1080/1331677X.2019.1691930

Real earnings management and corporate governance: a study of Latin America

Cristhian Mellado orcid.org/0000-0003-2298-1295
Paolo Saona orcid.org/0000-0002-3151-9855

Abstract

This article analyses the impact of ownership structure features
and institutional settings on real activities manipulation. The
analysis is based on a sample of listed companies in the underexplored
Latin American market for the period of 2004–2016. Paneldata-
based G.M.M. System Estimation is used in the empirical
analysis. The results confirm that the monitoring role of the
majority owner is crucial in mitigating managerial opportunistic
behaviour. Here, opportunistic behaviour refers to engaging in
real activities manipulation that reduces the informative content
of financial statements. However, analysis of insider ownership
revealed that managers had a negative impact on transparency.
We observed that as insider ownership increases, managers
engage more actively in real earnings management. We also find
that the institutional ownership and the quality of the regulatory
system proved to be effective mechanisms in reducing real activities
manipulation.

Keywords

real activities manipulation; earnings management; corporate governance; ownership structure; institutional setting

Hrčak ID:

254592

URI

https://hrcak.srce.hr/254592

Publication date:

9.2.2021.

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