The Effect of Interactions between Real Earnings Management and Corporate Governance on Firm Value

This study examined the effect of corporate governance on earnings management and firm value on companies listed on the securities market from 2013 to 2019. To summarize the analysis results of this study, it is as follows. First, corporate governance has been shown to have a significant (＋) effect on abnormal cash flows of operations(CFOs) and abnormal discretionary expenditure(DISE), although significant levels are different. Both abnormal production costs(PRODs) and integrated measurements(REM) were shown to have statistically significant negative effects. Thus, entities can interpret whether their governance structures are good or weak as having a positive or negative impact on earnings management. Second, abnormal cash flows of operations(CFOs) and abnormal production costs (PRODs), individual measures of earnings management, were found to have a significant negative effect on firm value, indicating that increasing reported profits through abnormal cash flows of operations(CFOs) or abnormal production costs(PRODs) is not reflected in corporate values. abnormal discretionary expenditures(DISE) was not significant. In addition, the integrated measures REM were shown to have a positive (＋) effect on firm value. This means that even if the quality of profit through actual profit adjustment is distorted, it is functionally stuck in the earnings figure and determines the firm value. Third, The impact of interactions between earnings management and corporate governance on firm value was consistent with the impact of earnings management on firm value. Therefore, the effect of earnings management on firm value rather than corporate governance is greater.