The influence of Corporate Governance and the external mechanisms of control in trade-off among results management strategies

• Published in: Revista Catarinense da Ciência Contábil 2022-07, Vol.21, p.e3250
• Main Authors: Telles, Rafael Scuizato, Moraes, Romildo de Oliveira
• Format: Article
• Language: English
• ISSN: 1808-3781; 2237-7662
• DOI: 10.16930/2237-7662202232502

The objective of the study was to analyze the influence of corporate governance (CG) and external control mechanisms on the trade-off among results management strategies by discretionary accruals and by operational decisions. The sample consisted of 177 companies listed in B³. Corporate governance was investigated through the index developed by Leal et al. (2015). The results management was captured by Paulo’s model (2007) in the case of discretionary accruals, by the Roychowdhury’s model (2006) in the case of operational expenses and the Vuong’s test (1989) for the trade-off among these strategies. The study extends the investigations in the scope of results management by investigating whether endogenous (corporate governance) and exogenous (external control mechanisms) facts to the company influence the managers in their options by managing the results by discretionary accruals or operational decisions. In the results, it was verified that corporate governance and external control mechanisms influence the trade-off among the outcome strategies. The presence of these variables led managers to prioritize management utilization through discretionary accruals to the detriment of management through operational decisions. The research contributes to the literature on results management by detecting variables that influence the managers’ discretionary decisions as to which management strategy to use, bringing practical contributions to signaling to the stakeholders that governance and external control mechanisms are effective in their role of inhibiting results management.