The role of independent directors, bank loan and institutional holding on discretionary accruals - some Indian evidences. (6th May 2021)

• Record Type: Journal Article
• Authors: Dhar, Satyajit; Banerjee, Somnath; Dutta, Anirban
• Is Part Of: International journal of accounting and finance. Volume 10:Number 2/3(2020)
• Page Start: 111
• Page End: 129
• Publication Date: 2021-05-06
• Subjects: earnings management -- discretionary accruals -- bank loan -- institutional holding -- independent director; Accounting -- Periodicals; Finance -- Periodicals; 332.05
• Languages: English
• ISSNs: 1752-8224

Abstract

Earnings management encompasses the methods and techniques of inflating or deflating reported income to serve some inappropriate objective of the management or the managers of firms. We wanted to examine whether bank loan and institutional holding, and proportion of independent directors in the board have any influence on earnings management in India. We have collected data of 246 firm years of industry representative firms and have computed discretionary accruals for them using Jones model and then computed statistical correlation of discretionary accrual with bank loan and institutional holding, and the proportion of independent directors in the board. As we expected, we have found negative correlation of discretionary accruals with bank loan and institutional ownership, and independent directors. We have finally shown a regression to establish this.