Abstract

The resulting literature has been emphasizing the importance of corporate governance and focusing on the impact of one mechanism on financial reports. There is less research that synthesizes the diversified monitor tools or incorporates the influence of internationalization on corporate governance. In this study, we apply the internationalization theory, agency theory, and stewardship theory to investigate the impact of internal and external monitoring mechanisms as well as internationalization on earnings management. Based on a sample of 1171 observations from listed firms in the electron industry between 2002 and 2005, we find that the CEO duality, independency of directors, monitoring from sophisticated institutional investors, and enterprise's internationalization could reduce the earnings manipulation by managers. Furthermore, among the competitive theories, we find that the agency theory is more suitable in explaining of corporate governance than stewardship theory. Our result also sheds light on the important impact of the internationalization theory on corporate governance system.