PRIVATE BENEFITS OF CONTROL AND EARNINGS MANAGEMENT: THE CASE OF FRENCH LISTED COMPANIES
Journal Title: European Journal of Business and Social Sciences - Year 2013, Vol 2, Issue 3
Abstract
This study aims to determine the effect of earnings management on private benefits of control, and to study the indirect relationship between the control mechanisms and the private benefits through earnings management. Most French companies are family owned and very concentrated. Private benefits of control are particularly high. They can be extracted by the owners of blocs and managers through the related party transaction and excessive executive compensation. If controlling shareholders manage the results to transfer maximum wealth of the company, the existence of internal governance mechanisms such as the director’s board and the audit committee appear as limiting factors to the effect of earnings management on private benefits of control. Drawing on a French sample, of 44 listed firms, during the period 2001†2011, the empirical results show that earnings management is positively associated with private benefits of control and the board of directors. Our work also offers insight to policy makers regarding the power of control mechanisms. The audit committee and director’s board can moderate the relationship between earnings management and private benefits of control.
Authors and Affiliations
Imen Ben Saanoun, Youssef Riahi, Mounira Ben Arab
Keywords
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