Abstract
Purpose: This paper aims to examine the relationship between board characteristics (BCs) on classification shifting (CS) among listed non-financial German firms.
Design/methodology/approach: Using 870 firm-year observations of German non-financial firms from 2010 to 2019 listed on DAX, MDAX and SDAX index, this paper examines the relationship between BCs (board size [BS], board meetings [BM], board independence [BI] and board gender diversity [BGD]) and CS. .
Findings: This study found that managers of German firms use CS and move recurring expenses to non-recurring expenses to inflate their core earnings. Also, this study found that BCs including BS, BI and BGD have a mitigating effect on CS practices of German non-financial firms. However, the number of BMs does not influence earnings management.
Practical implications: This paper recommends that German firms’ board must be constituted with more independent members and female representation because these board mechanisms help to curb CS.
Originality/value: The focus of this study is Germany, which is a bank-oriented economy with low transparency and investor protection. This paper provides new evidence on how BCs impact CS among German firms, whereas previous CS studies focused mainly on market-oriented economies like the USA and the UK.
Original language | English |
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Pages (from-to) | 565-582 |
Number of pages | 18 |
Journal | International Journal of Accounting and Information Management |
Volume | 30 |
Issue number | 5 |
Early online date | 15 Sept 2022 |
DOIs | |
Publication status | Published - 30 Sept 2022 |
Keywords
- Board characteristics
- Classification shifting
- Corporate governance
- Earnings management
ASJC Scopus subject areas
- Management Information Systems
- Accounting
- Economics, Econometrics and Finance(all)