The influence of life cycle stages on the corporate governance and earnings management relationship among Latin American publicly held companies
DOI:
https://doi.org/10.17524/repec.v18i1.3280Keywords:
Gerenciamento de Resultados, Governança Corporativa, Estágios do Ciclo de VidaAbstract
Objective: To analyze the influence of life cycle stages (LCS) on the relationship between corporate governance (CG) and earnings management (EM) of publicly listed companies in Latin America.
Method: Data from 278 Latin American companies were collected from 2011 to 2021 from Refinitiv Eikon® and analyzed using Heckman correction for self-selection model (1979) and multiple linear regression, with robust error correction and fixed effects for country, year, and sector, resulting in 1,792 observations. Dickinson’s (2011) model was used to classify LCS, and Pae’s (2005) model was adopted for EM. CG was measured according to the Refinitiv Eikon® governance standard.
Results: CG contributed to reducing EM, and a lower level of EM was found in the initial (introductory and growth) and maturity stages compared to the final stages (shake-out and decline). The analysis of the influence of LCS on the CG and EM relationship showed that CG is more effective in reducing EM in a company’s initial stages than in its final stages. In contrast, there is a decrease in CG’s ability to mitigate EM in the maturity stage compared to the final stages.
Contributions: These results enable a better understanding of how the effectiveness of CG mechanisms in reducing EM practices can be enhanced or minimized throughout LCS. Thus, organizations should pay attention to their LCS when attempting to improve their control mechanisms.
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