Does CEO Duality Undermine the Financial Reporting Benefits of Ind-AS? Evidence from India
Keywords:
Ind-AS, IFRS, CEO Duality, Real Earnings Management, Financial Reporting Quality, Corporate Governance, Agency Theory.Abstract
This study investigates the relationship between duality of the CEO and the effectiveness of Indian Accounting Standards (Ind-AS) in restraining the real earnings management (REM). The convergence of International Financial Reporting Standards (IFRS) with the existing regulatory framework of Indian Accounting Standards (Ind-AS) aims to enhance comparability and transparency of financial reporting, and improve the quality of financial statements. But effectiveness of accounting standards is not only driven by the reporting requirements but also by governance structures overseeing the application of accounting standards. This study, based on the concepts of agency theory, examines whether the benefits of higher reporting quality arising from the adoption of Ind-AS are diminished in the presence of CEO duality. REM is applied as a financial reporting quality proxy using a sample of 290 listed firms in India. Fixed-effects and pooled OLS regressions are estimated. The findings show that the adoption of Ind-AS is related to the reduction of REM, which contributes to better reporting quality. The direct influence of CEO duality is not significant. There is, however, positive and statistically significant relationship between Ind-AS and CEO duality such that the firms with CEO duality have higher REM post-Ind-AS adoption. The results indicate that the outcomes of accounting reforms can be jeopardized by the centralization of decision-making.Downloads
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