Determining the impact of corporate governance on real earnings management among publicly-listed manufacturing firms in Malaysia, Indonesia, and the Philippines for the years 2011-2015

Date of Publication


Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Accountancy

Subject Categories



Ramon V. Del Rosario College of Business



Thesis Adviser

Wilfredo A. Baltazar
Aeson Dela Cruz

Defense Panel Member

Herminigilda E. Salendrez
Rodiel C. Ferrer
Juancho S. Ong


Due to the fact that shareholders and analysts look into earnings in order to determine the attractiveness of a particular stock, managers are often engaged in committing earnings management to improve financial image. Studies regarding earnings management have been prevalent, however, majority of these studies focused on discretionary accruals as a means of measuring earnings management. There have been only a few studies which explored the area of real earnings management. The researchers seek to contribute to the small amount of literature found regarding real earnings management, particularly through overproduction. This study aims to determine whether or not there is a relationship between different corporate governance characteristics and real earnings management through overproduction. The study is set in the ASEAN region where the results gathered were from publicly-listed manufacturing firms in the following countries: Malaysia, Indonesia and the Philippines. The researchers deemed it appropriate to focus on manufacturing firms since these types of companies are argued to be highly inclined in the performance of managing earnings through overproduction.

This research would particularly test the effect of board size, board independence, CEO duality, audit committee size and ratio of female directors to abnormal production costs which represents the practice of real earnings management through overproduction by means of a series of regression analysis. Abnormal production costs were measured using the model found in the work of Roychowdury (2006). The necessary data such as the corporate governance characteristics and financial information needed were gathered from the annual reports of the different companies.

A total sample of 592 of publicly-listed manufacturing companies from Malaysia, Indonesia and the Philippines was utilized in this study. By running a panel data regression for each country, results showed that all five of the board characteristics had no significant effect on the practice of real earnings management through overproduction for all of the three countries except for CEO duality in Indonesian companies which showed significance. The researchers believed that the existence of CEO duality in the board would increase the engagement of the company in real earnings management. This positive relationship could be attributed to the fact that too much power is given to a single person. This means the CEO would have greater control over the accounting information of the company hence, granting him an easy way to manipulate earnings. Another factor to be considered is there would be divided attention present for people who are both CEO and chairperson. Due to this, the person faces a hard time in competently performing his tasks on both levels which includes monitoring the activities of the firm as a result of this improper governance, misrepresenting earnings would be easier for the management.

Abstract Format






Accession Number


Shelf Location

Archives, The Learning Commons, 12F, Henry Sy Sr. Hall

Physical Description

xi, 168 leaves: illustrations (some colored); 28 cm. + 1 computer disc ; 4 3/4 in.


Compensation management -- Malaysia; Compensation managment -- Indonesia; Compensation management -- Philippines; Overproduction -- Malaysia; Overproduction -- Indonesia; Overproduction -- Philippines; Corporate governance -- Malaysia; Corporate governance -- Indonesia; Corporate governance -- Philippines

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