The effect of CEO duality and board independence on earnings management

Abstract

This paper studies the influence of CEO duality and board independence on earnings management for Chinese firms with three-year increasing earnings. Modified Jones Model (1995) is used to calculate discretional accruals to measure the level of earnings management and only firms with positive accruals are investigated. The result is that CEO duality has a positive and statistically significant relationship with earnings management for firms with three-year increasing earnings. However, this paper finds no significant relationship between board independence and corporate governance. This study contributes to existing research about corporate governance and earnings management in China.