THE CAUSAL RELATIONSHIP MODEL OF AUDIT COMMITTEE FORMER GOVERNMENT OFFICIALS AND CEO’S DISCRETION ON REAL EARNINGS MANAGEMENT
Keywords:
audit committee, former government, real activities management, causal relationship modelAbstract
The objectives of this research were twofold: 1) to examine a causal relationship model between audit committee members who were former government officials and CEOs’ discretion in real earnings management using empirical data, and 2) to analyze the effects of audit committee members who were former government officials and CEOs’ discretion on real earnings management of companies listed on the Stock Exchange of Thailand (SET). Financial statement data from 1,205 listed companies on the SET from 2017 to 2021 were analyzed using a structural equation model (SEM). The study found that 1) the causal relationship model was significantly fitted to the empirical data (x2 = 1.985, df = 2, x2 /df = .992, GFI = .997, AGFI = .984, IFI = 1.000, CFI = 1.000, RMSEA = .000). 2) The administrative power of the chief executive officer had a positive effect on real earnings management. 3) Audit committees comprising former government officials had a positive effect on the administrative power of the chief executive officer. 4) Audit committees comprised of former government officials with an understanding of accounting, finance, and internal control did not positively affect the chief executive officer's administrative power. This research provides policy recommendations for compliance units to consider good corporate governance.
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