Board of directors

The purpose of this paper is to investigate the role of political instability in the context of the association between board of directors (BOD) and audit committee (AC) quality as indicators of corporate governance effectiveness and earnings management (EM). The non-financial listed companies on the Palestine Exchange (PEX) between the period from 2011 to 2018 were the samples of the study. Based on the OLS regression results by using a panel data of 232 observations, the findings show that the BOD quality is positively related to EM, while AC quality is negatively associated with EM. The results also reveal that political instability plays a moderating role by weakening the relationship between the AC quality and EM during the severe unstable political situation, while the BOD quality is negatively associated with EM under the same situation. This finding implies that the BODs might substitute ACs under severe political instabilities to protect the stockholders and stakeholders’ interests. Unlike most previous studies, this article addresses political instability as a moderating variable for the relationship between the BOD and AC quality as a composite measure of EM in the most emerging and smallest stock market in the region. The results of this work may assist the regulatory bodies, policymakers, and practitioners in revising the corporate governance code to promote the efficiency of the BOD and AC monitoring functions for the purpose to improve the faithfulness and reliability of financial reports and also to deter the management from engaging in critical levels of EM.

Tax is one of the primary sources of government revenue which is a principal part of the government budget and is considered an inevitable part of corporate payments. The Board of directors is one of the chief decision-making groups in determining corporate tax avoidance. Therefore, the relationships seen in the form of a social network between the board members of various companies can affect the tax policy of companies. The primary purpose of this study is to examine the structure of relationships between companies based on their joint board members and to detect the relationship between the companies position in the network of board members' relations with their tax planning activities. The statistical population of this research was all companies listed on the Tehran Stock Exchange from 2011 to 2020. The social network analysis approach developed on graphic techniques based on graph theory and regression analysis was used to conduct the research analysis. The research results show that some companies active in the Tehran Stock Exchange have a better position than other companies in the network. In addition, evidence showed that the status and position of companies in the network of relationships could affect the extent of their tax avoidance.