Proceedings of The 5th International Conference on Applied Research in Business, Management and Economics
The Role of Ethical Leadership in Constraining Earnings Management Practices: A Survey of Literature
Ahmad A. Toumeh
The current article includes a comprehensive review of both empirical and theoretical literature from major academic journals and publications in developing and developed countries. The review confirms that the accounting system is full of “discretion room,” which allows managers to alter their reported earnings. On the other hand, existing research emphasises the importance of an ethical perspective in the financial reporting process. Accordingly, the present study adds to the body of knowledge by introducing ethical leadership as a solution for earnings management practices as ethical leadership plays a critical role in controlling the phenomenon and minimising the manipulated earnings to the greatest extent possible. This study is the first literature review on the ethical leadership and earnings management so far.
Keywords: Earnings management, ethical leadership, ethics, fraud.