This study examines the relationship between corporate social responsibility (CSR) reporting, board gender diversity (BGEND) and real earnings management (REM). It also investigates how the relationship between CSR reporting and REM differs between gender-diverse and non-diverse firms. Content analysis was used to measure CSR reporting. The ordinary least square regression is used to examine the relationships for a sample of 475 firm-year observations listed on the Amman Stock Exchange during 2011–2016. The results show that CSR reporting is significantly and negatively associated with REM in the Jordanian market. Nevertheless, BGEND is negatively and significantly related to REM. More importantly, the results show that BGEND moderates the CSR-REM relationship. Further, when the sample is split into board gender-diverse and non-diverse firms, the CSR-REM significant negative relationship is evident only in the former, corroborating the moderating role of the BGEND in Jordan. This study contributes to the literature on CSR, BGEND, and REM by offering evidence for the moderating role of BGEND on the CSR-REM relationship, supporting the view that females are more sensitive to ethics. Regulators and stakeholders should be aware of the potential effect of engagement in CSR reporting and the benefits of having a gender-diverse board on financial reporting quality.

The paper examines the effect of family ownership concentration (FMOC) on real earnings management (REM) in manufacturing firms listed on Bursa Malaysia (formerly known as Kuala Lumpur Stock Exchange). Data are gathered from 1,056 firm-year observations for the four-year period from 2013 to 2016. The feasible generalised least square estimation is used to examine the relationships. The results show that FMOC is negatively and significantly associated with REM. This evidence supports the alignment hypothesis that FMOC mitigates managerial earnings management by preventing real activities manipulation. However, the finding of the current study is contrary to the claim that family-controlled firms have lower earnings quality. This study extends previous empirical research by examining the effect of different levels of family control on REM in an emerging market and provides evidence that family firms have less incentive to engage in REM practices. The findings imply that earnings reported in the financial statements of Malaysian manufacturing family firms are more reliable as these firms do not manipulate earnings through real business activities. Policymakers may consider the results of the current study that show family-controlled firms have the motivation to self-monitor their business and avoid earnings manipulation activities. Investors may benefit from this evidence and invest in family firms. Future studies may extend the sample to cover other sectors to check the consistency of the findings. In addition, the paper uses data from Malaysia, a country characterised as a family-controlled market. Thus, the findings may not be similar to those of countries with lower FMOC.

Purpose: This study aims to investigate the monitoring role of internal audit function (IAF) on real earnings management (REM) practices. It examines the effect of investment in IAF (IIAF) and IAF sourcing arrangements on REM, unlike prior literature which has mainly examined the effects of IIAF on accrual-based earnings management.Design/methodology/approach: This study uses a sample of 1,056 observations from an emerging market, Malaysia, between 2013 and 2016. Feasible generalised least square (FGLS) regression is used to analyse the data. To corroborate the results of this study, the authors use an ordinary least square (OLS) regression model with robust standard errors adjusted and also consider alternative REM measures.Findings: The results of this study suggest that IIAF has a significant negative relationship with REM practices. Further, in-house IAF sourcing has a significant negative association with REM. The additional analysis supports the main results confirming the essential role of IAF in reducing REM in the Malaysian market.Practical implications: The evidence relates to the important role of IAF in mitigating REM practices. High-quality of IAF impairs managers’ ability to manage earnings in their own interests. The findings may be useful in informing regulators, managers, shareholders and other investors, as well as researchers, about improving the role of IAF.Originality/value: This study contributes to the existing literature by providing the first evidence of the significant role of IIAF and IAF sourcing arrangements in mitigating REM in an emerging country.

The main aim of the current study is to examine the effect of Chief Executive Officer (CEO) characteristics on earnings management proxied by discretionary accruals. The study used 1,957 firm-year observations listed in Bursa Malaysia for the period from 2012 to 2016. Panel data method is used to examine the established hypotheses. The results show a significant negative association between CEO tenure, network, and gender and discretionary accruals. These results suggest that CEOs with more extended periods serving in the firm, CEOs with several external directorships, and female CEOs are more rigorous in improving their strategic decisions and are less likely to engage in earnings management. Hence, they are associated with high financial reporting quality (FRQ). However, there is no significant relationship between CEO expertise, CEO age and discretionary accruals. The results are robust to an alternative measure of discretionary accruals. Therefore, the current study extends the FRQ and corporate governance literature by investigating the impact of CEO characteristics on earnings quality and, consequently, FRQ. The results are important for policymakers, stockholders, and market participants in identifying the importance of CEO characteristics in producing high FRQ.

In recent years, increasing attention has been given to real earnings management (REM) as an alternative method to accrual-based earnings management. This paper reviews the recent studies on REM to provide updated and comprehensive information about this type of earnings management. Specifically, the review focuses on REM definitions, motivations, techniques, consequences, and measurement. In addition, the paper provides a discussion of the theoretical frameworks used by researchers as underpinning theories of earnings management. The review of the literature showed that companies have shifted earnings management practising from accruals-based to real activities based. Useful suggestions for REM research opportunities are also provided.

This study investigates the relationship between the Chairman’s characteristics (age, title, tenure, and ownership) and the firm’s operating performance (measured by profitability and liquidity), and whether the Chief Executive Officer’s (CEO) effectiveness (a combination of non-duality, age, and tenure) strengthens or impairs this relationship. Based on a total sample of 267 observations, we use Ordinary Least Squares (OLS) regression to investigate the hypotheses established for the top 89 non-financial firms listed on the Malaysian Main Market during 2017 to 2019. The findings show that Chairman age is positively and significantly associated with the firm’s profitability but not with liquidity. Conversely, Chairman ownership is positively and significantly associated with liquidity but not with profitability. These findings suggest that the age and ownership of the Chairman may significantly boost operating performance. However, Chairman tenure is negatively and significantly associated with operating performance (profitability and liquidity), suggesting that long-tenured Chairmen are associated with poor operating performance. Chairman title is insignificantly related to operating performance. Importantly, the results also show that CEO effectiveness strengthens the relationship between Chairman tenure and liquidity. However, CEO effectiveness impairs the relationship between Chairman title and profitability and Chairman ownership and liquidity. Additional analysis is conducted to further check the validity of the main results and to avoid any possible effect of endogeneity issues. To our knowledge, this paper is the first to investigate the impact of Chairman characteristics on operating performance with the moderating effect of CEO effectiveness, specifically in a developing economy.