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Effect of Corporate Governance on Earnings Management in UK

Corporate Governance And Earnings Management In The UK

Introduction

Research Background

Corporate governance has great importance in the long-term success of organizations. Corporate governance set out policies for the company and decide about the roles and responsibilities of the directors and executive manager (Alhadab, 2016). Earning management is the system through which companies manipulate the financial data to change the financial position of the company. History of the earning management is as old as the history of the financial report making. In the past times earning management was not enough organized as it is now in the present age. But still, executives and directors were used to manipulating financial data in different ways with the purpose to earn their personal benefits. Now manipulation and earning management is quite common in our businesses.

Corporate governance is playing the active role in this earning management and data manipulation. A number of empirical research studies are conducted on this topic to analyze the role of corporate governance in the earning management systems, and to view the adoption of earning management strategies in the companies of United Kingdom. Research conducted by the Dube and Howell claims that earning management system is not an invention of the 20th century. According to their research findings in early 1880s companies were used to manipulate data with the support of their directors and executives.

Effect of Corporate Governance on Earnings Management in UK

Research Aim

The research aim is to explore the use of earning management system by the corporate governance in the United Kingdom. The research will critically view the role of corporate governance in the manipulation of the financial data and other earning management systems. The research will view the literature and case studies on the earning management use in the UK companies listed in London stock exchange.

Research Objectives

The major objectives of the research are presented below in a list

  • To identify the role of corporate governance in the earning management
  • To evaluate the impact of earning management on profitability
  • To elaborate on the effects of earning management on shareholders
  • To provide the view of earning management use in UK companies.

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