The Impact of Governance Mechanisms on The Relationship between Earnings Management Practices and The Comparability of Financial Statements: An Applied Study on Non-Financial Companies Listed on the Egyptian Stock Exchange

Ismail, Farida Saleh Ezzat

doi:10.21608/aljalexu.2024.381068

The Impact of Governance Mechanisms on The Relationship between Earnings Management Practices and The Comparability of Financial Statements: An Applied Study on Non-Financial Companies Listed on the Egyptian Stock Exchange

Document Type : Original Article

Author

Farida Saleh Ezzat Ismail

Master's researcher Faculty of Business - Alexandria University

10.21608/aljalexu.2024.381068

Abstract

The research aims to test the relationship between earnings management practices and the comparability of financial statements, and to test the impact of some corporate governance mechanisms on this relationship as a moderating variable of the relationship, using a sample of non-financial companies listed on the Egyptian Stock Exchange. This study also examines whether the opportunistic earnings management activities of managers affect the comparability of their companies' financial statements with other companies.
The study found that with the increase in earnings management practices, the comparability of financial statements decreases. In contrast, the study found an increase in managers' real earnings management (REM) practices, while accruals-based earnings management (AEM) practices decrease, which meaning that managers replace real earnings management practices with accruals-based earnings management practices.
The research also presents a study of the role of corporate governance mechanisms on the relationship between earnings management practices and the comparability of financial statements. Corporate governance mechanisms include audit quality, board of directors’ characteristics, and audit committee.

Keywords