Effect of firm characteristics and corporate governance practices on earnings management: Evidence from publicly listed property sector firms in the Philippines

Two types of earnings management (EM), opportunistic and efficient motive, were presented in the literature. This article aimed to investigate the type of EM employed by publicly listed property sector firms in the Philippines. Furthermore, the study also examined the effect of firm characteristics and corporate governance practices on firm’s level of EM using discretionary accruals. In conducting this study, panel data econometric technique, particularly the ordinary least squares was used to determine which among the firmspecific characteristics (profitability, leverage, cash flows from operations and firm size) or corporate governance mechanisms (CEO duality, board size, board independence and audit quality) significantly influence publicly listed property sector firms’ EM activities using discretionary accruals. Results show that these firms employ efficient type of EM. Also, cash flows from operations, firm size and CEO duality are statistically significant predictors of EM for property firms. Except for cash flows from operations, these results contradict with prior studies when the same model was subjected for industrial firms. Such similarities and differences from previous studies warrant for further analysis on the peculiarities and intrinsic characteristics of the industrial and property sector in the Philippines. Such will point to certain policy frameworks in enabling EM to be harnessed in satisfying the firms’ bottom lines