Operationalization
| Variables and denotations | Measurement | Related studies |
|---|---|---|
| Earnings management (dependent variable) | ||
| 1. Earnings Management (REMi,t) | The dependent variable of this study is earnings management measured using three proxies; sales-based manipulations (abnormal cash flow from operations), discretionary expenses based (abnormal discretionary expenses), and production cost based (abnormal production cost). These three proxies of earnings management were based on the model established by the Dechow et al. (1998) and applied by Roychowdhury (2006) | Roychowdhury (2006) |
| Corporate governance mechanisms (Independent variables) | ||
| 1. Board Size (BSIZEi,t) | Total number of board of directors for firm i and period t | Yasser and Mamun (2016) |
| 2. Board Independency (INDBDi,t) | Number of independent non-executive directors on the board for firm i and period t | Chen and Zhang (2012) |
| 3. CEO-Chair duality (CEOCHAIRi,t) | Coded as “1”, if CEO and Chairman roles are separated, and “0” otherwise, for firm i and period t | Yasser and Mamun (2016) |
| 4. Board Meetings (BMEETi,t) | Number of board meetings for firm i and period t | Xie et al. (2003) |
| 5. Board Expertise (BFAEXPi,t) | Number of members with financial or/and accounting qualifications for firm i and period t | Ebaid (2013) |
| 6. Audit Committee size (AUDSIZEi,t) | Number of members in the audit committee for firm i and period t | Chen and Zhang (2012) |
| 7. Audit Committee Independency (INDACi,t) | Number of independent non-executive directors on the audit committee for firm i and period t | Abdullah and Ismail (2016) |
| 8. Audit Committee Meetings (ACMEETi,t) | Number of audit committee meetings for firm i and period t | Xie et al. (2003) |
| 9. Audit Committee Skill base in Finance and Accounting (ACFAEXPi,t) | Number of members with finance or/and accounting qualifications in the audit committee for firm i and period t | Chen and Zhang (2012) |
| Control variables | ||
| 1. Leverage (LEVi,t) | Ratio of total debt at the end of the period to the total assets at the end of the period t of firm i | Lai and Tam (2017) |
| 2. BIG4 (BIG4i,t) | Coded “1” if the auditor is a Big 4 audit firm, and “0” otherwise of the firm i for the period t | Chen et al. (2007) |
| 3. Firm size (FSIZEi,t) | Natural logarithm of sales of firm i for the period t | Yasser and Mamun (2016) |
| 4. Growth (GROWTHi,t) | Sales growth of firm i form the period t−1 to t. | Ji et al. (2015) |
| Variables and denotations | Measurement | Related studies |
|---|---|---|
| 1. Earnings Management (REM | The dependent variable of this study is earnings management measured using three proxies; sales-based manipulations (abnormal cash flow from operations), discretionary expenses based (abnormal discretionary expenses), and production cost based (abnormal production cost). These three proxies of earnings management were based on the model established by the | |
| 1. Board Size (BSIZE | Total number of board of directors for firm | |
| 2. Board Independency (INDBD | Number of independent non-executive directors on the board for firm | |
| 3. CEO-Chair duality (CEOCHAIR | Coded as “1”, if CEO and Chairman roles are separated, and “0” otherwise, for firm | |
| 4. Board Meetings (BMEET | Number of board meetings for firm | |
| 5. Board Expertise (BFAEXP | Number of members with financial or/and accounting qualifications for firm | |
| 6. Audit Committee size (AUDSIZE | Number of members in the audit committee for firm | |
| 7. Audit Committee Independency (INDAC | Number of independent non-executive directors on the audit committee for firm | |
| 8. Audit Committee Meetings (ACMEET | Number of audit committee meetings for firm | |
| 9. Audit Committee Skill base in Finance and Accounting (ACFAEXP | Number of members with finance or/and accounting qualifications in the audit committee for firm | |
| 1. Leverage (LEV | Ratio of total debt at the end of the period to the total assets at the end of the period | |
| 2. BIG4 (BIG4 | Coded “1” if the auditor is a Big 4 audit firm, and “0” otherwise of the firm | |
| 3. Firm size (FSIZE | Natural logarithm of sales of firm | |
| 4. Growth (GROWTH | Sales growth of firm | |
Source: Author constructed
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