CORPORATE GOVERNANCE AND ITS IMPACT ON EARNING MANAGEMENT: STUDY IN A CHOSEN SAMPLE OF COMPANIES LISTED IN THE IRAQI STOCK EXCHANGE

Abstract

This paper introduces the concept of Agency Theory, which underscores the importance of monitoring mechanisms in aligning the interests of management, shareholders, and stakeholders to prevent exploitative behaviour. The study's primary aim is to investigate how various corporate governance attributes, encompassing ownership arrangements and board makeup, and CEO duality, impact earnings management in non-financial firms listed in Iraq. The study employs panel data encompassing the years 2007 to 2019, which combines time-series and cross-sectional information, necessitating the utilization of complex econometric models to capture firm-specific dynamics and trends. Predominantly, the Fixed Effects (FE) model is applied to account for unchanging, unobservable individual differences that could potentially distort the outcomes. The findings of the study reveal that Earnings Management (EM) and Ownership Concentration (OC) display a statistically significant relationship with the dependent variable at the 5% significance level, signifying a robust correlation. Moreover, Insider Shareholdings (ISH), Family Ownership (FO), Board Independence (BI), Board Size (BS), and the duality of CEO and chairman responsibilities (CEOD) exhibit statistical significance at the 10% level, indicating a moderate yet noteworthy association. The study's implications extend to policymakers and researchers, offering valuable insights into the intricate interplay the connection between corporate governance and EM.