The Threshold Effects of National Governance Quality on the Earnings Management – Performance Nexus: Evidence From Dynamic Panel Threshold Regression
The present study revisits the relationship between earnings management (EM) and firm performance, employing a nonlinear threshold approach and introducing national governance quality (NGQ) as a potential threshold variable. This study demonstrates how NGQ at the country level influences the impact...
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| Format: | Article |
| Language: | English |
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SAGE Publishing
2024-12-01
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| Series: | SAGE Open |
| Online Access: | https://doi.org/10.1177/21582440241298402 |
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| author | Emmanuel Mensah Christopher Boachie |
| author_facet | Emmanuel Mensah Christopher Boachie |
| author_sort | Emmanuel Mensah |
| collection | DOAJ |
| description | The present study revisits the relationship between earnings management (EM) and firm performance, employing a nonlinear threshold approach and introducing national governance quality (NGQ) as a potential threshold variable. This study demonstrates how NGQ at the country level influences the impact of EM on firms’ performance at the micro level. Utilizing dynamic frameworks with data encompassing 52 firm samples across nine sub-Saharan African countries spanning from 2007 to 2019, the study reveals that the beneficial impact of EM on performance materializes when NGQ falls below a certain threshold. Beyond this threshold, the influence of EM becomes marginal or occasionally adverse on firm performance. As a result, we suggest that policymakers in Africa and other emerging and developing economies consider the estimated nonlinear relationship between EM and firm performance, as well as the NGQ threshold, when devising governance strategies. It is also imperative to consider institutional quality when making investment decisions and to promote rigorous standards for earnings management and institutional issues. JEL Classification: C24, C33, C38, G30, G34, M41. |
| format | Article |
| id | doaj-art-4a82b7c99ca4423dad63b41bdf10d3d9 |
| institution | OA Journals |
| issn | 2158-2440 |
| language | English |
| publishDate | 2024-12-01 |
| publisher | SAGE Publishing |
| record_format | Article |
| series | SAGE Open |
| spelling | doaj-art-4a82b7c99ca4423dad63b41bdf10d3d92025-08-20T02:31:09ZengSAGE PublishingSAGE Open2158-24402024-12-011410.1177/21582440241298402The Threshold Effects of National Governance Quality on the Earnings Management – Performance Nexus: Evidence From Dynamic Panel Threshold RegressionEmmanuel Mensah0Christopher Boachie1University of Professional Studies, Legon, Accra, GhanaCentral University, Tema, Accra, GhanaThe present study revisits the relationship between earnings management (EM) and firm performance, employing a nonlinear threshold approach and introducing national governance quality (NGQ) as a potential threshold variable. This study demonstrates how NGQ at the country level influences the impact of EM on firms’ performance at the micro level. Utilizing dynamic frameworks with data encompassing 52 firm samples across nine sub-Saharan African countries spanning from 2007 to 2019, the study reveals that the beneficial impact of EM on performance materializes when NGQ falls below a certain threshold. Beyond this threshold, the influence of EM becomes marginal or occasionally adverse on firm performance. As a result, we suggest that policymakers in Africa and other emerging and developing economies consider the estimated nonlinear relationship between EM and firm performance, as well as the NGQ threshold, when devising governance strategies. It is also imperative to consider institutional quality when making investment decisions and to promote rigorous standards for earnings management and institutional issues. JEL Classification: C24, C33, C38, G30, G34, M41.https://doi.org/10.1177/21582440241298402 |
| spellingShingle | Emmanuel Mensah Christopher Boachie The Threshold Effects of National Governance Quality on the Earnings Management – Performance Nexus: Evidence From Dynamic Panel Threshold Regression SAGE Open |
| title | The Threshold Effects of National Governance Quality on the Earnings Management – Performance Nexus: Evidence From Dynamic Panel Threshold Regression |
| title_full | The Threshold Effects of National Governance Quality on the Earnings Management – Performance Nexus: Evidence From Dynamic Panel Threshold Regression |
| title_fullStr | The Threshold Effects of National Governance Quality on the Earnings Management – Performance Nexus: Evidence From Dynamic Panel Threshold Regression |
| title_full_unstemmed | The Threshold Effects of National Governance Quality on the Earnings Management – Performance Nexus: Evidence From Dynamic Panel Threshold Regression |
| title_short | The Threshold Effects of National Governance Quality on the Earnings Management – Performance Nexus: Evidence From Dynamic Panel Threshold Regression |
| title_sort | threshold effects of national governance quality on the earnings management performance nexus evidence from dynamic panel threshold regression |
| url | https://doi.org/10.1177/21582440241298402 |
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