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Corporate Governance pp 277–298Cite as

Corporate Governance and Earnings Management: Quarterly Evidence from Turkey

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Abstract

In 2003, following other developed and developing economies, the Capital Markets Board of Turkey (CMB) issued Corporate Governance Principles, in order to improve the board structure, increase shareholders rights, and enhance financial reporting quality through public disclosure and transparency in order to raise public confidence in, and restructure the Turkish capital market. One of the central issues in corporate governance is that there is no unique definition of good corporate governance practices that fit with the needs of all jurisdictions or firms. Considering Turkey’s legal environment, the effectiveness of corporate governance principles in the country is of utmost importance. The CG principles developed in the country were adapted from Corporate Governance Principles of the OECD, which is a subject of debate in terms of enhancing the firm value. Therefore, this chapter aims to present the role of corporate governance on the quality of reported earnings of the ISE listed firms. Overall, the results indicate that the role of the board on quarterly earnings management in Turkey is highly contradictory and it is related to the direction of earnings management and external audit conducted by the Big-4 accountancy firms. Therefore, as a further policy implication, the corporate governance structure of Turkish firms should be strengthened by new regulations taking into account the needs of Turkish firms and the nature of the business culture in the country.

This chapter is derived and developed from the unpublished PhD thesis “The Role of Corporate Governance on Earnings Management: Quarterly Evidence from Turkey”, submitted to the Graduate School of Social Sciences of Izmir University of Economics in December, 2010.

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Notes

  1. 1.

    In order to estimate quarterly discretionary accruals, the following models were employed; the Jones Model (Jones 1991), the Modified Jones Model (Dechow et al. 1995), the Adapted Model (Dechow et al. 2003), the Forward Looking Model (Dechow et al. 2003), the Kazsnik Model (Kazsnik 1999), the Larcker and Richardson Model (Larcker and Richardson 2004) and the Kothari et al. Model (Kothari et al. 2005). The Larcker and Richardson (2004) Model adjusted for the Adapted Model (Dechow et al. 2003) provides the most significant coefficient and highest adjusted-R2.

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Author information

Authors and Affiliations

  1. Department of Business Administration, Izmir University of Economics, Sakarya Caddesi No: 156, 35330, Balçova, Izmir, Turkey

    Yasemin Zengin Karaibrahimoğlu

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  1. Yasemin Zengin Karaibrahimoğlu
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Correspondence to Yasemin Zengin Karaibrahimoğlu .

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Editors and Affiliations

  1. London Metropolitan University London Metropolitan Business School, London, United Kingdom

    Samuel O Idowu

  2. İktisadi ve İdari Bilimler Fakültesi İşletme Bölümü, Trakya Universitesi, Edirne, Edirne, Turkey

    Kiymet Tunca Çaliyurt

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Karaibrahimoğlu, Y.Z. (2014). Corporate Governance and Earnings Management: Quarterly Evidence from Turkey. In: Idowu, S., Çaliyurt, K. (eds) Corporate Governance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-45167-6_15

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