Surplus free cash flow, earnings management and audit committee

Rina Br Bukit, Takiah Mohd Iskandar

    Research output: Contribution to journalArticle

    30 Citations (Scopus)

    Abstract

    The objective of this study is to examine whether high surplus free cash flow is related to earnings management. This study hypothesizes managers of high surplus free cash flow companies have incentive to engage in earnings management. However, earnings management occurs less frequently when the audit committee is more independent. Independent audit committees provide an effective monitoring over earnings management practices. This study expects that the positive relationship between surplus free cash flow and earnings management is moderated by independent audit committee. Using a sample of 155 companies listed on the main board of Bursa Malaysia in 2001, this study obtains empirical evidence consistent with the prediction in all hypotheses. This study shows that independent audit committee help companies with high surplus free cash flow to reduce income increasing earnings management practices.

    Original languageEnglish
    Pages (from-to)204-233
    Number of pages30
    JournalInternational Journal of Economics and Management
    Volume3
    Issue number1
    Publication statusPublished - Jun 2009

    Fingerprint

    Earnings management
    Free cash flow
    Audit committee
    Surplus
    Management practices
    Empirical evidence
    Prediction
    Income
    Incentives
    Malaysia
    Monitoring
    Listed companies
    Managers

    Keywords

    • Audit committee
    • Earnings management
    • Surplus free cash flow

    ASJC Scopus subject areas

    • Economics, Econometrics and Finance(all)
    • Business and International Management
    • Strategy and Management

    Cite this

    Surplus free cash flow, earnings management and audit committee. / Bukit, Rina Br; Iskandar, Takiah Mohd.

    In: International Journal of Economics and Management, Vol. 3, No. 1, 06.2009, p. 204-233.

    Research output: Contribution to journalArticle

    Bukit, Rina Br ; Iskandar, Takiah Mohd. / Surplus free cash flow, earnings management and audit committee. In: International Journal of Economics and Management. 2009 ; Vol. 3, No. 1. pp. 204-233.
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