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The Relationship Between Corporate Governance and Firm Value: Role of Discretionary Earnings Management

Thesis Info

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Author

Nazir, Sajid

Program

PhD

Institute

COMSATS University Islamabad

City

Lahore

Province

Punjab

Country

Pakistan

Thesis Completing Year

2016

Thesis Completion Status

Completed

Subject

Applied Sciences

Language

English

Link

http://prr.hec.gov.pk/jspui/bitstream/123456789/7538/1/Sajid_Nazir_Management_Sciences_2016_CIIT_13.06.2016.pdf

Added

2021-02-17 19:49:13

Modified

2024-03-24 20:25:49

ARI ID

1676727592276

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The Relationship Between Corporate Governance and Firm Value: Role of Discretionary Earnings Management Corporate governance practices help in enhancing firm value by effectively monitoring the managerial decisions as well as reducing the level of information asymmetry and agency problem between empowered managers and dispersed minority shareholders. The present study investigates the relationship between corporate governance and firm value for the developing economy of Pakistan. The study has also taken into consideration the moderating role of discretionary earnings management in corporate governance-firm value relationship, which is considered to be a relatively ignored research issue in corporate finance literature. In addition to focusing on individual mechanisms of corporate governance (i.e. audit, board, compensation, ownership), the present study has also constructed a composite corporate governance index to investigate the role of effective corporate governance in mitigating earnings management and enhancing firm value. The data of 208 firms listed at Karachi Stock Exchange for a time period of 2004- 2011 has been used for analysis and accounting, market and economic measures of performance have been used as firm value. The study finds that corporate governance plays a vital role in enhancing firm value in long as well as short run. Constitution of internal audit committees as an effective internal audit system is essential for the enriched progress of a firm. The monetary incentives and compensation paid to the top executives motivates them to work in the best interests of the company which increases not only short term accounting value of firm but also long term market and economic value. The findings reveal that discretionary earnings management practices by corporate managers damage the firm value in long term and it could be mitigated by effective corporate governance mechanisms. Moreover, this value damaging role of discretionary earnings management negatively moderates between effective corporate governance and firm value. Firms with earnings manipulation weakens the impact of effectiveness of governance system and leads to lower firm value. Finally, the study suggests some practical implications based upon the findings for investors, policy makers and manager.
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مولانا محمد عمران خان ندوی الازہری

آہ! مولانا محمد عمران خان ندوی الازہری
۲۲؍ اکتوبر ۸۶؁ء کو یکایک خبر ملی کہ مولانا حافظ محمد عمران خان ندوی ازہری اپنے خاندان والوں کو دل فگار اور اپنے جاننے والوں کو دل گیر چھوڑ کر تہتر (۷۳) سال کی عمر میں اس عالم فانی سے عالم جادوانی کو سدھارے، اس خبر سے جسم و دماغ پر ایک بجلی گر پڑی۔
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وہ بھوپال کے رہنے والے تھے، ۱۹۴۷؁ء کے بعد جب بھوپال کا فرماں روا خاندان بھوپال چھوڑ کر دوسری جگہ پناہ گزین ہوگیا تھا تو مولانا عمران خان ندوی نے اپنی قوت ارادی کو بروئے کارلاکر بھوپال کے لوگوں کے دلوں پر اپنی فرماں روائی شروع کردی اور یہ نمونہ پیش کیا کہ تاج و تخت کے بغیر بھی اخلاص کی پاکیزگی، نیت کی طہارت اور عمل کی پختگی کے ساتھ فرماں روائی ہوسکتی ہے۔
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