Effect of Corporate Governance Practices on the Earnings Management Practices: A Case of Pakistani Banking Sector

Abstract

Banks are highly  focusing on real Corporate Governance practices to provide accurate and unbiased information  in their annual financial reports but still managers  are encouraged to do earnings managementr to beat expectations. Further, concentrated ownership in banks, give more benefit to majority shareholder as compare to minority shareholders which ultimately resulting in exploitation of  the of minority shareholder’s intersts, causing principal-principal(P-P) conflict. This study examines the effect of Corporate Governance practices and P-P conflicts on practices of Earning Management in banking Sector. This study uses regression analysis for estimation. The findings reveals that there is a inverse  relationship between percentage  of independent directors in Board and earning mangement Practices . Moreover ownership concentration is positively associated with the Earning Management Practices. This study has implications for management of the banks, regulatory bodies and for investors.