Abstract
The scope of this paper is to analyze the impact of corporate governance quality (namely board size, board independence, managerial ownership, institutional ownership and CEO duality) on the earnings management behaviour of European Union's football clubs over the period 2006–2009. Empirical results documented that corporate governance quality mitigates aggressive earnings manipulation (income smoothing, accrual manipulation and reporting small positive income) by football managers and specifically clubs with increased board independence, managerial ownership and institutional ownership and small board size are associated with high quality financial reporting through the deterioration of earnings management behaviour. These findings dictate the necessity of sound corporate governance principles to protect the interests of shareholders and various stakeholders, and prevent the expropriation of wealth by managers and maximize the clubs’ economic results and social return. The empirical findings are robust to several sensitivity tests concerning the functioning form of the models and the measures of earnings management.
Acknowledgements
The author would like to thank the editor of ESMQ, Professor Taks and two anonymous reviewers for their useful comments and suggestions that resulted in a significant improvement of the paper. The author takes the sole responsibility for any errors and omissions.