*Assistant Professor, Accounting DepartmentFaculty of Administrative Science & Economics, University of Isfahan, Iran
**Master of accounting, Islamic Azad University, Shahre Kord Branch, Iran
***Master of accounting, Accounting Department, Faculty of Administrative Science & Economics, University of Isfahan, Iran
The purpose of this study is to investigate the role of Corporate Governance Mechanism in reducing the negative effect of Earnings Management on the Firm Value. Earnings management can be harmful to firm value if it arises from managerial opportunism, whereas it can also be beneficial if managers intend to convey some information about future earnings or reduce the volatility of reported earnings. The accounting data and Corporate Governance Mechanism data are collected from the annual financial reports of the listed companies in Tehran Stock Exchange (TSE) during 2008–12. The Tobin's Q ratio is applied to measure the firm value and the discretionary accruals are applied as to represent the earning management. The institutional Shareholders, separation of managing directors’ duties from the board chairman duties and the board's level of independence are used as the Corporate Governance Mechanism. The empirical evidences indicate that the earning management has a significant negative effect on the firm value. This negative effect is reduced though Corporate Governance Mechanism as managerial opportunism is lowered. Corporate Governance Mechanism has a crucial role in reducing the negative effect on the firm value.
Firm value, Earnings management, discretionary accruals, corporate governance mechanism
