Audit committee effectiveness and real earnings management: Ownership structure as a moderator in emerging market

Abstract

This study examines whether audit committee effectiveness constrains real earnings management (REM) in Egypt and whether ownership structure conditions this relationship. Distinct from prior Egyptian and MENA studies that focus primarily on accrual-based manipulation or isolated audit committee attributes, we operationalize audit committee effectiveness as a composite construct (independence, size, meeting frequency, and financial expertise) and test its conditional impact across four ownership types (institutional, family, governmental, and foreign). Using 134 Egyptian non‑financial listed firms over 2014–2024 (1,473 firm‑years), the results show that larger, more active, and more financially expert audit committees are associated with lower REM, whereas measured independence is positively related to REM, consistent with symbolic compliance in concentrated‑ownership settings. Institutional and family ownership attenuate the REM‑constraining role of audit committee effectiveness, while foreign ownership strengthens it; governmental ownership shows mixed effects. The findings imply that regulators should tighten and enforce substantive (not merely formal) independence requirements and disclosure; boards should prioritize audit committee expertise and meeting diligence; and investors should calibrate stewardship to curb REM where ownership is concentrated.