Search

Purpose: The study examines whether corporate governance moderates the relationship between CEO compensation and earnings management. Design/methodology/approach: The study uses 1,800 firm-year observations from 2005 to 2010 and employ multiple regression analyses and other sensitivity tests. Findings: The study finds a positive relationship between CEO compensation and earnings management. The study's results also suggest that CEO bonus compensation increases in relation to earnings management and therefore the study infers that managers may become involved in earnings management to increase their compensation. However, the study finds that the relationship is moderated by a strong corporate governance system which reduces the impact of earnings management on CEO compensation. Research limitations/implications: The study is conducted in a specific context, and therefore it may be subject to a set of limitations. The study emphasises exclusively on whether executives manage earnings to increase their compensation. The study does not consider the issue of several other and potentially contradictory motivations here. Practical implications: The study's findings highlight potential implications and offer useful propositions for stakeholders, particularly accounting and corporate governance regulators, to consider. The findings offer a basis for the accounting professions to further discuss and improve accounting standards to provide adequate regulations and monitoring to decrease managerial opportunistic behaviours in earnings manipulations. The findings also emphasise the need for appropriately designed CEO compensation packages in such a manner that improves the manager–shareholder alignment and reduces the information asymmetry problem. The results signify that corporate governance plays a vital role in mitigating the relationship between CEO compensation and earnings management. Originality/value: This study adds to the existing literature by documenting empirical support on the link between earnings management and CEO compensation against a backdrop of high demand for strong corporate governance practices. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to examine the impact of board female participation on Australian firms' innovation. Design/methodology/approach: Data are from the 500 largest Australian Securities Exchange (ASX)-listed companies for 2004–2015. Measures of innovation concern input (research and development expenditure and intangible assets) and output (patents registered) indicators. Findings: A positive and significant association exists between female director participation and firm innovation activity. This association exists across industry classifications independent of technological importance and is particularly driven by materials and health-care sectors. Findings support calls for more board diversity in line with board female membership positively influencing innovative investment and development activities. Practical implications: The economic efficacy of the latest revisions to the ASX Corporate Governance Council principles and recommendations ("ASX CGC revisions") is supported. Diverse boards are a strong source of innovation. Regulators and corporations can use the findings to establish principles and practices that promote female board diversity. Originality/value: This study is the first to examine the link between board diversity and corporate innovation in Australia where there is under-representation of women on corporate boards and in key management positions. Also lacking are formal legislative or governance policy mandates on board gender diversity. Beyond confirming a positive association between board diversity and levels of corporate innovation, this paper provides new findings that this relationship is driven by women who are non-executive (independent) directors, independent of the underlying technology intensity of firms and moderated by the nature of firm-level profitability and growth opportunities. [ABSTRACT FROM AUTHOR]

Recent regulatory changes in Australia require listed companies to implement policies for increasing board diversity and to report thereon. In this paper we examine the association between gender diversity on corporate boards and the financial performance of a large sample of the top 500 listed companies in Australia during the period 2005-2011, addressing many of the methodological weaknesses in prior studies. Our descriptive statistics show that the proportion of female directors on boards increased markedly between 2010, when ASX amended principles came into effect, and 2011. The results also show that board diversity is positively associated with financial performance after controlling for a number of firm-specific, ownership and governance characteristics and potential endogeneity with the two-stage least square tests. Thus, we inform the policy debate by providing empirical evidence supporting the business case for board diversity. [ABSTRACT FROM AUTHOR]

From 1970 to 2003, we document earnings restatements for the top 500 Australian firms, examine the characteristics of restating firms, and test whether restatements are value relevant. Of the 195 earnings restatements, 49 per cent decrease prior-period earnings (negative restatements). Negative restatements are relatively larger than positive restatements. We identify three reasons for earnings restatements; namely, accounting policy changes, revision of estimates, and errors and unknown, and they comprise 49, 40 and 11 per cent of the sample, respectively. Restatement firms have higher growth opportunities and are smaller than non-restating firms from the same industry. Restatements are generally negatively associated with market and non-market value. [ABSTRACT FROM AUTHOR]