The impact of audit committee on real earnings management: Evidence from Netherlands

Sana Mardessi Masmoudi ORCID logo, Yosra Makni Fourati


This paper aims to examine the effect of the characteristics of an audit committee on real earnings management in the Dutch context. Our sample is composed of 80 non-financial companies listed on the Amsterdam Stock Exchange during the period between 2010 and 2017. Four proxies are used to measure audit committee characteristics, namely, audit committee independence, financial expertise, gender diversity, and audit committee meetings. To test our hypotheses, we use a regression model to identify the influence of a set of audit committee characteristics on real earnings management after controlling for firm audit committee size, leverage, size, loss, growth and board size. Our analyses provide evidence that audit committee independence and gender diversity constrain real earnings management. Our findings also suggest that audit committee financial expertise reduces to some extent the likelihood of engaging in real earnings management. To the best of our knowledge, the Dutch context is not yet explored especially following the issue of the long-awaited new Dutch Corporate Governance Code in 2016 which has been updated for a long period in 2008. Therefore, corporate governance is a relevant topic in the Netherlands. This study contributes geographically to the Audit Committee and earnings management literature that examines another possible method, specifically, real earnings management.

Keywords: Audit Committee, Financial Expertise, Independence, Real Earnings Management, Netherlands

Authors’ individual contribution: Conceptualization – M.S.M. and M.Y.F.; Methodology – M.S.M. and M.Y.F.; Investigation – M.S.M. and M.Y.F.; Writing – Original Draft – M.S.M. and M.Y.F.

Declaration of conflicting interests: The Author(s) declare(s) that there is no conflict of interest.

JEL Classification: G30, M40, M42

Received: 16.01.2020
Accepted: 20.03.2020
Published online: 25.03.2020

How to cite this paper: Masmoudi, S. M., & Makni, Y. F. (2020). The impact of audit committee on real earnings management: Evidence from Netherlands. Corporate Governance and Sustainability Review, 4(1), 33-46.

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