MANAGEMENT OF REAL RESULTS AND CORPORATE GOVERNANCE IN BRAZILIAN COMPANIES WITH FINANCIAL DIFFICULTIES

Objective of the study: To analyze the moderating effect exerted by corporate governance mechanisms on earnings management through operational decisions in Brazilian companies that faced financial difficulties between 2011 and 2019. Methodology/Approach: Corporate governance was assessed by assessing CEO membership on the board of directors and considering individual board member resignations in relation to re-election. The degree of financial difficulty was estimated using the Z -Score of Altman et al. (1979). Earnings management was quantified using the Roychowdhury (2006) model. Originality/relevance: new empirical evidence in the Brazilian context that relates the role o corporate governance in the relationship between earnings management and financial stress. Main results: The results indicate a significant relationship between the degree of financial difficulty and earnings management, as well as the moderation exercised by corporate governance mechanisms. There was a positive impact of the audit committee's expertise and the CEO's participation in the Board of Directors, but a negative impact associated with the individual re-election of board members. Furthermore, it was found that the magnitude of earnings management is more pronounced in companies experiencing financial difficulties. Theoretical/methodological contributions: Advances at the intersection of the themes of financial difficulties and results management through operational decisions. Social/management contributions: Companies in financial difficulties can redefine their corporate governance structure to inhibit earnings management practices.