Corporate governance, external financing, and earnings management: new evidence from an emerging market

Future Business Journal

Table 6 Two-stage regression results for the impact of corporate governance and external financing activities on earnings management

Panel A: First stage with dependent variable: TEMAR
Variable	Coef	z	P
ROA	3.554	6.66	0.000
DEBR	0.256	1.74	0.001
SIZE	− 0.109	− 5.62	0.000
MBR	0.075	2.13	0.004
Constant	3.245	6.43	0.000
LR chi2	121.82
Prob	0.0000
Pseudo R2	0.0413

Panel B: Second Stage—Corporate governance, external financing and earnings management
Variables	TEMA(1)				TEMR (2)
Variables	Coef	Coef	Coef	Coef	Coef	Coef	Coef	Coef
XFIN	1.682***				0.242
	(4.33)				(0.33)
CGS	0.021	− 0.231	− 0.044	− 0.094	− 0.069	− 0.080	− 0.077	0.049
	(0.17)	(− 1.60)	(− 0.50)	(− 0.68)	(− 0.29)	(− 0.30)	(− 0.32)	(0.05)
XFIN × CGS	− 1.742				− 0.492
	(− 1.72)				(− 0.25)
EQUIF		1.971*		1.781*		0.780		0.799
		(2.46)		(2.45)		(0.54)		(0.54)
EQUIF × CGS		− 3.887		− 3.433		− 1.219		− 1.216
		(− 1.89)		(− 1.84)		(− 0.32)		(− 0.32)
DEBF			1.430**	1.401**			0.469	0.493
			(2.58)	(2.89)			(0.05)	(0.05)
DEBF × CGS			− 0.329	− 0.271			− 0.336	− 0.352
			(− 0.23)	(− 0.21)			(− 0.14)	(− 0.14)
IMR	0.396	0.641	0.672	0.542	− 1.111	− 1.184	− 1.084	− 1.179
	(4.40)	(5.73)	(6.25)	(5.39)	(− 6.01)	(− 5.73)	(− 6,25)	(− 5.71)
Constant	0.518	0.516	0.394	0.480	1.163	1.207	1.156	1.205
	(8.68)	(7.20)	(5.45)	(7.24)	(9.87)	(9.12)	(9.90)	(8.96)
Year FE	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Industry FE	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
chi2	154.30	13.71	128.59	182.41	0.31	1.32	0.32	1.51
Pro > chi2	0.000	0.0033	0.000	0.000	0.9575	0.7237	0.9570	0.9115

This table presents two-stage regression results for the impact of corporate governance and external financing activities on earnings management in Eq. (10): TEMAR_it = a₀ + a₁ROA_it + a₂DEBR_it + a₃SIZE_it + a₄MBR_it + e_it and Eq. (11): TEMA_it /TEMR_it = β₀ + β₁XFIN_it + β₂CGS_it + β₃XFIN_it*CGS_it + β₄IMR_it + e_it. The definitions for the variables are provided previously. Values in parentheses are z-value. *, **, and *** indicate statistical significance at 10%, 5%, and 1%, respectively