The Role of Ethical Leadership in Constraining Earnings Management Practices: A Survey of Literature

Proceedings of The 5th International Conference on Applied Research in Business, Management and Economics

Year: 2022

DOI: https://www.doi.org/10.33422/5th.bmeconf.2022.10.20

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The Role of Ethical Leadership in Constraining Earnings Management Practices: A Survey of Literature

Ahmad A. Toumeh

ABSTRACT: 

This paper aims at reviewing the literature on ethical leadership and earnings manipulation, with an emphasis on the role of ethical leader in reducing earnings management practices. The review reveals that the accounting system and accounting standards (e.g. IFRS, US GAAP, national GAAP) have plenty of leeway in changing the reported earnings. On the other hand, prior research highlights the significance of an ethical perspective in the financial reporting process. As a result, the current study adds to the body of knowledge by introducing ethical leadership as a solution to constrain earnings manipulation practices to the greatest possible extent. The findings of this paper will be useful to, investors, management, shareholders, auditors, and regulators seeking to understand and control earnings manipulation practices. This is a conceptual paper, future studies are required to empirically verify the proposed proposition.

Keywords: Earnings management, earnings manipulation, integrity, moral management, ethical leadership.