Public Sector Accounting and Budgeting

Public Sector Accounting and Budgeting

Spatial modeling of the moderating effect of major shareholder ownership on the relationship between audit committee characteristics and real earnings management

Document Type : Original Article

Authors
Asgar Mandegar Nesab 1
Akbar Zavari Rezai 2
1 M.Sc., Urmia University, Faculty of Economics and Management, Department of Accounting, Urmia, Iran
2 Assistant Professor, Department of Accounting, Faculty of Economics and Management, Urmia University, Urmia, Iran
10.22034/psab.2025.216373
Abstract
This study was conducted with the aim of examining the moderating effect of major shareholder ownership on the relationship between audit committee characteristics and real earnings management, within seven selected industries listed on the Tehran Stock Exchange over the period 2011–2023. The results obtained from spatial generalized method of moments (SGMM) modeling revealed that audit committee independence and board independence have a significantly negative impact on real earnings management. In addition, the presence of positive spatial autocorrelation at the industry level was confirmed, indicating an interdependent influence among earnings management practices across firms operating in similar industries. Furthermore, major shareholder ownership exhibited a direct positive association with earnings management and simultaneously weakened the monitoring effectiveness of the audit committee in constraining such opportunistic behavior. Firm size and board size were also found to be positively correlated with real earnings management activities. These findings underscore the critical importance of enhancing corporate governance structures )particularly through reinforcing independence within audit committees and boards) and regulating ownership concentration to mitigate earnings manipulation and promote financial reporting quality. 
Keywords
Real earnings management
Audit committee
Board independence
Major shareholder ownership
Spatial econometrics

Subjects

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Public Sector Accounting and Budgeting
Volume 6, Issue 1 - Serial Number 19
February 2025
Pages 114-141

  • Receive Date 07 December 2024
  • Revise Date 13 February 2025
  • Accept Date 28 February 2025