The causal influence among CG mechanism, accounting frauds and earnings multiple

Abstract

The core purpose of this research is to explore the causal influence among CG mechanism, accounting frauds and earnings multiple. For this purpose, board size, board meetings and audit committee size are taken as the measures for corporate governance mechanism. I have the accounting measures i.e., ROE and ROA as the proxies for earnings multiples. I have measured accounting frauds through earning management. I have measured earnings management through Modified Jones model. I have used 6 years’ data from 2013-2019 of top 15 non-financial firms listed in PSX based on their outstanding shares. The data I have used is panel data. I have extracted the data from Data stream and annual reports of the selected firms. I have used OLS, random effect GLS and fixed effect GLS in STATA 15 for the empirical investigation of the data. The results of the study showed that ROA has significantly affected by board meetings and board meetings effected the ROE significantly while Earnings management has significantly affected by board size.