Independent directors, family firms and income smoothing


  • Warawit Phetruen Naresuan University


Corporate governance, Independent director, Earnings management, Income smoothing


The objective of this study is to investigate the relationship between independent directors and income smoothing and the effect of family firms on the effectiveness of independent directors of Thai listed companies.  A sample consists of non-financial 497 firms listed on The Stock Exchange of Thailand and the Market for Alternative Investment (MAI). Financial data of the sample between 2008 and 2017 were collected and analysed by multiple regression analysis. Overall, the results show independent directors on the board have no significant relationship with income smoothing. However, the findings from the analysis of the sample consists of only non-family firms and family firms separately show that independent directors on the board have a negatively significant relationship with income smoothing for non-family firms but show no evidence of such relationship for the family firms. In addition, inclusion of the interaction term between independent directors and family firms into the analysis reveals that the family firm has a negative effect on the supervisory effectiveness regarding financial reporting of independent directors.


ตลาดหลักทรัพย์แห่งประเทศไทย. (2555). กรรมการอิสระและกรรมการตรวจสอบ. สืบค้น 22 กรกฎาคม 2562, จาก

วรวิทย์ เพ็ชรรื่น และสุภาพร ดอกไม้ทอง. (2562). ความสัมพันธ์ของการกำกับดูแลกิจการที่ดีกับการตกแต่งบัญชี :

หลักฐานจากบริษัทจดทะเบียนของไทย. วารสารบริหารธุรกิจ เศรษฐศาสตร์และการสื่อสาร, 14(3), 133-145.

Bradbury, M., Mak, Y. T., & Tan, S. (2006). Board characteristics, audit committee characteristics and

abnormal accruals. Pacific accounting review, 18(2), 47-68.

Chen, X., Cheng, Q., & Wang, X. (2015). Does increased board independence reduce earnings management? Evidence from recent regulatory reforms. Review of Accounting Studies, 20(2), 899-933.

Cheng, A. C. S., Liu, Z. C., & Thomas, W. (2012). Abnormal Accrual Estimates and Evidence of Mispricing. Journal of Business Finance & Accounting, 39(1‐2), 1-34. doi: 10.1111/j.1468-5957.2011.02274.x

Copeland, R. M. (1968). Income smoothing. Journal of accounting research, 6, 101-116.

Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting earnings management. The accounting

review, 70(2), 193-225.

Eckel, N. (1981). The Income Smoothing Hypothesis Revisited. Abacus, 17(1), 28-40.

Gao, L., & Zhang, J. H. (2015). Firms’ earnings smoothing, corporate social responsibility, and valuation.

Journal of Corporate Finance, 32, 108-127.

Graham, J. R., Harvey, C. R., & Rajgopal, S. (2005). The economic implications of corporate financial

reporting. Journal of accounting and economics, 40(1-3), 3-73.

Hutchinson, M. R., Percy, M., & Erkurtoglu, L. (2008). An investigation of the association between corporate governance, earnings management and the effect of governance reforms. Accounting Research Journal, 21(3).

Jaggi, B., Leung, S., & Gul, F. (2009). Family control, board independence and earnings management:

Evidence based on Hong Kong firms. Journal of Accounting and Public Policy, 28(4), 281-300.

Jones, J. J. (1991). Earnings management during import relief investigations. Journal of accounting research, 29(2), 193-228.

Klein, A. (2002). Audit committee, board of director characteristics, and earnings management. Journal of

accounting and economics, 33(3), 375-400.

Kothari, S. P., Leone, A. J., & Wasley, C. E. (2005). Performance matched discretionary accrual

measures. Journal of accounting and economics, 39(1), 163-197.

Leuz, C., Nanda, D., & Wysocki, P. D. (2003). Earnings management and investor protection: an

international comparison. Journal of financial economics, 69(3), 505-527.

Levitt, A. (1998). The numbers game. The CPA Journal, 68(12), 14-19.

Lhaopadchan, S., Budsaratragoon, P., & Hillier, D. (2016). Earnings Management, Corporate

Governance and Insider Trading: Evidence from Thailand. Chulalongkorn Business Review,

(3), 107-156.

Mansor, N., Che-Ahmad, A., Ahmad-Zaluki, N., & Osman, A. (2013). Corporate governance and

earnings management: A study on the Malaysian family and non-family owned PLCs. Procedia

Economics and Finance, 7, 221-229.

Monetary Authority of Singapore. (2012). Code of Corporate Governance. Retrieved July 22, 2019 from


Peasnell, K. V., Pope, P. F., & Young, S. (2005). Board monitoring and earnings management: Do

outside directors influence abnormal accruals? Journal of Business Finance & Accounting,

(7-8), 1311-1346.

Persons, O. S. (2006). Corporate governance in Thailand: what has been done since the 1997 financial

crisis? International Journal of Disclosure and Governance, 3(4), 288-305.

Prencipe, A., & Bar-Yosef, S. (2011). Corporate governance and earnings management in family-

controlled companies. Journal of Accounting, Auditing & Finance, 26(2), 199-227.

Securities Commission Malaysia. (2017). Malaysian Code On Corporate Governance. Retrieved July 22,



Shen, C. H., & Chih, H. L. (2007). Earnings management and corporate governance in Asia's emerging

markets. Corporate Governance: An International Review, 15(5), 999-1021.

Thoopsamut, W., & Jaikengkit, A. (2009). Audit committee characteristics, audit firm size and quarterly

earnings management in Thailand. Oxford Journal, 8(1), 3-12.

Tucker, J. W., & Zarowin, P. A. (2006). Does income smoothing improve earnings informativeness? The

accounting review, 81(1), 251-270.




How to Cite

Phetruen, W. (2020). Independent directors, family firms and income smoothing. Journal of Accountancy and Management, 11(4), 133–145. Retrieved from



Research Articles