Citation

Deeb Okour, Anwar Said (2024) Corporate governance and earnings management of industrial companies in Jordan and Malaysia: The moderating effects of external auditors and regulatory quality. PhD thesis, Multimedia University.

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Abstract

Earning management has increased recently and it is motivated by the desire of companies to fabricate their financial results to attract investors. One of the mechanisms to deal with earning management is corporate governance. However, there are mixed findings regarding the effect of corporate governance on earning management. This study examines the relationship between corporate governance and earnings management practices in Jordanian and Malaysian industrial sectors. Based on the literature and agency theory, three mechanisms of corporate governance were proposed to affect the earning management, and these include the Board of Director (BOD), Audit Committee (AC) and ownership structure. In addition, the study proposed external auditor factors and regulatory quality as moderators. Data was collected from 63 industrial firms in Malaysia and Jordan between 2013-2022. The data was analysed using the STATA software. The findings showed that BOD characteristics such as BOD size, BOD independence affected negatively the earning management in Malaysia and Jordan while CEO duality affected positively the earning management in both countries. BOD meetings showed mixed effects. AC size and AC meetings did not affect earning management in Malaysia and Jordan while AC independence has a negative effect. Further, the managerial and family ownership showed a negative effect on earning management, but the institutional ownership was only significant in Malaysia. External auditor factors moderate negatively the negative effect of AC on earning management in Malaysia and Jordan. In addition, the regulatory quality moderated the effect of BOD and AC as well as ownership structure on earning management in Jordan and only the effect of AC on earning management in Malaysia. These findings emphasize key implications. In Malaysia, audit committee expertise and external audit quality emerged as crucial tools for reducing earnings manipulation, suggesting that internal professionalism and external scrutiny work hand in hand in a more mature regulatory environment. In contrast, the results in Jordan highlight the need for stronger institutional enforcement and greater board independence to curb earnings management, especially in firms with concentrated ownership. These findings underscore that while the core principles of corporate governance are transferable, their effectiveness depends on country-specific regulatory capacity and governance culture. Decision makers have to strengthen the practice of transparency, accountability, and independence of AC and BOD to reduce the earning management. Lesson learned from the comparison between Malaysia and Jordan were discussed and more studies using different sample, industry and countries are needed to more understand the link between corporate governance and earning management.

Item Type:	Thesis (PhD)
Additional Information:	Call No.: HG4028.E27 A59 2024
Uncontrolled Keywords:	Earnings management
Subjects:	H Social Sciences > HG Finance > HG4001-4285 Finance management. Business finance.
Divisions:	Faculty of Management (FOM)
Depositing User:	Ms Nurul Iqtiani Ahmad
Date Deposited:	19 Jan 2026 05:52
Last Modified:	19 Jan 2026 05:52
URII:	http://shdl.mmu.edu.my/id/eprint/15195

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