Corporate governance bundles and earnings management: The role of audit committees and ownership concentration

Abstract

Drawing on the notion of governance bundles, this study aims to verify whether
governance mechanisms are interrelated and reveal the interaction mechanisms
between firm-level governance. By using a unique dataset from Thailand
with 1,364 firm-year observations from years 2017–2020 and moderating
regression as a research tool, the findings indicate that a larger audit committee
is necessary for firms with concentrated ownership to offset the power of
controlling shareholder over earnings management. Theoretically, the findings
ensure that corporate governance within the firm functions collectively as a
bundle. In addition, the findings challenge the existing regulations in a way that
audit committee size should not be standardized for all types of firms. Instead,
the size of such a committee should vary depending on the degree of ownership
concentration.