The Effect of Corporate Governance on Earnings Management Through Accounting Conservatism: Evidence from Pakistani Banking Sector
DOI:
https://doi.org/10.63468/sshrr.216Keywords:
Corporate Governance, Accounting Conservatism, Earnings Quality, Audit Committee, Board Independence, Ownership Structure, Pakistani Banking Sector, Financial Reporting, Panel Data Analysis, Emerging MarketsAbstract
This study investigates the effect of corporate governance mechanisms on earnings management, with accounting conservatism acting as a mediating variable. The objective is to explore how governance structures such as board independence, audit committee characteristics, ownership concentration, board size, and CEO duality influence the degree of earnings management practices in firms, particularly in the context of the Pakistani banking sector. Accounting conservatism is examined as a potential pathway through which strong governance discourages opportunistic financial reporting.
Using panel data from annual reports of commercial banks in Pakistan over a 10-year period (2014–2024), regression analysis is employed to test the direct and indirect relationships. The results suggest that effective corporate governance reduces earnings management by promoting conservative accounting practices. The mediating role of accounting conservatism is found to be significant, indicating that it serves as a mechanism through which governance enhances financial transparency and reliability.
This research contributes to the literature by highlighting the importance of conservative accounting as a tool for mitigating earnings manipulation in emerging markets.
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Copyright (c) 2025 Dr. Bushra Zulfiqar, Jaweria Ikhlaq, Saima Kalsoom, Ifrah Arooj, Muhammad Shahryar, Seemab Malik
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