Managers Discretionary Behaviour, Earnings Management and Internal Mechanisms of Corporate Governance: Empirical Evidence from Chilean Firms

23 Pages Posted: 8 Jun 2005

See all articles by Félix J. López-Iturriaga

Félix J. López-Iturriaga

Universidad de Valladolid - Department of Finance and Accounting; National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy

Paolo Saona

University of Valladolid - Department of Economics and Business Administration

Abstract

We analyze the ability of the capital structure and the ownership structure as mechanisms of control of the managers of the firms and to reduce their accounting discretionary power for a sample of Chilean firms. Using earnings management and abnormal accruals as indicators of discretionary behavior, our results show that both debt and ownership concentration reduce the managers' discretionary behavior, so we corroborate the outstanding role both mechanisms play in a country with low protection of investors' rights. At the same time, we find that earnings management is fostered by institutional investor ownership.

Keywords: Accruals, capital structure, corporate governance, earnings management, ownership structure

JEL Classification: G32, G34, M41, M43, M47

Suggested Citation

Lopez-Iturriaga, Felix Javier and Saona, Paolo, Managers Discretionary Behaviour, Earnings Management and Internal Mechanisms of Corporate Governance: Empirical Evidence from Chilean Firms. Available at SSRN: https://ssrn.com/abstract=739246 or http://dx.doi.org/10.2139/ssrn.739246

Felix Javier Lopez-Iturriaga (Contact Author)

Universidad de Valladolid - Department of Finance and Accounting ( email )

Avda. Valle Esgueva 6
47011 Valladolid
Spain
+34 983 184 395 (Phone)
+34 983 183830 (Fax)

National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy ( email )

Lebedeva,27
Perm, Perm 614070
Russia

Paolo Saona

University of Valladolid - Department of Economics and Business Administration ( email )

Avda. Valle Esgueva 6
47011 Valladolid
Spain

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