The Impact of Corporate Governance Characteristics on Earnings Quality and Earnings Management: Evidence from Jordan

This study empirically examines the impact of corporate governance characteristics on earnings quality and earnings management. The sample of this study consists of all financial companies listed on the ASE; the total number of companies was 73 companies. Which are listed on an ASE from year 2007 to 2012. This study mainly investigated the main corporate governance characteristics that affect the earnings quality and also affect the earnings management for the Jordanian firms. The board size, CEO duality, board composition, audit committee size, audit committee composition and audit committee activity are used to measure the corporate governance characteristics. The absolute and signed value of discretionary accruals, which is calculated by the modified Jones model, are used to estimate earnings quality and earnings management, respectively. The results provided that the audit committee size and audit committee activity has a relation with each of earnings quality and earnings management. The researcher recommends the financial Jordanian companies to reduce the number of board of directors members, to adjust the proportion of the external directors and non-executive in each of the board of director and the audit committee.