An Investigation of Corporate Governance Mechanisms on Real Earnings Management toward the Changes on Firm Performance: Evidence from Jordan

Abstract

Corporate Governance were always considered as protection tool towards the stakeholders interest in the capital market. However, the manipulation of the Real Earnings Management activities were also create a major treat among of the stakeholders whenever it were engaged among of top management of the business organizations. In this particular study, it was discussed with the few components under corporate governance mechanism together with theirs impacts on the firm performance in the business organization. It was believed as the selected components were have a significant influence towards the changes of the value relevance towards the business organizations in the capital market activities. Introduction In recent times, Corporate Governance has been enlisted as top priority for the economic growth of any country (Bansal and Sharma, 2016). So, most countries across the globe introduced new codes of better governance practices to align managers interest with the wealth maximization objective of the shareholders. But, despite the introduction of the codes of best governance practices in Jordan in 2009, the results that it has achieved can be said to be minimal as there are, where the Jordanian companies have not yet reached the phase of full compliance with the corporate governance code (Abbadi, Hijazi, and Al-Rahahleh, 2016). literature studies show have devoted considerable attention to the impact of corporate governance mechanisms on corporate behavior. while shows that these mechanisms have a substantial impact on earnings management, and affect performance. In this paper the researcher International Journal of Academic Research in Business and Social Sciences Vol. 8 , No. 11, Nov, 2018, E-ISSN: 2222-6990 © 2018 HRMARS 1391 an examines how governance mechanisms influence firm performance when measured performance is adjusted for the impact of real earnings management. Background of the Study The basic purpose of financial reports is to provide an insight for the different stakeholders and potential investors about the financial performance of the business. The main concern is about the presence of Earnings Management practices in financial reporting processes that produce manipulated and is leading financial reports in order to influence investor and stakeholder decisions (Kumari, Kumari, Pattanayak, and Pattanayak, 2017). In recent years and after the collapse of many companies, became the study of corporate governance in developing countries is ver…