IDENTIFYING THE MOST CONSISTENT CORPORATE GOVERNANCE MECHANISMS IN REDUCING REAL EARNINGS MANAGEMENT: LITERATURE REVIEW

Abstract

Real earnings management (REM) has become a critical issue in corporate governance research due to its potential to distort operational decisions and reduce the reliability of financial reporting. Although numerous studies have examined the relationship between corporate governance mechanisms and REM, empirical findings remain inconsistent across different governance structures and institutional contexts. This study aims to identify the corporate governance mechanisms that most consistently reduce real earnings management based on evidence from prior empirical studies. The research employs a non-systematic literature review approach using international journal articles indexed in Scopus that investigate the relationship between corporate governance mechanisms and REM. Data were collected through literature identification, selection, and extraction processes, followed by comparative synthesis analysis to map the consistency patterns of governance mechanisms. The results indicate that executive leadership attributes and board structure mechanisms produce mixed findings in the literature. In contrast, audit committee characteristics—particularly independence, expertise, and meeting frequency—consistently show a negative relationship with REM practices. These findings suggest that governance mechanisms directly related to financial reporting oversight tend to be more effective in constraining opportunistic managerial behavior. The study concludes that audit committee characteristics represent the most consistent corporate governance mechanism in reducing real earnings management.