European Journal of Economics, Finance and Administrative Sciences ISSN 1450-2275 Issue 35 (2011) © EuroJournals, Inc. 2011 http://www.eurojournals.com Does Corporate Governance Constrain Earnings Management? Evidence from U.S. Firms Mondher Kouki Faculty of Economic Sciences and Management of Tunis E-mail: koukimondher@yahoo.fr Abderrazek Elkhaldi Faculty of Law and Economic and Political Sciences of Sousse E-mail: Abderrazek.elkhaldi@yahoo.fr Hanen Atri Higher School of Economics and Business of Tunis E-mail: hanenatrifinance@yahoo.fr Slim Souid Faculty of Law and Economic and Political Sciences of Sousse E-mail: souidslim@yahoo.fr Abstract The purpose of this paper is to examine the influence of corporate governance mechanisms on earnings management for a panel of 171 U.S firms from 1998 to 2005. Consistent with earlier work, we find that auditing committee independency, the separation between chairman and CEO and manager as a membership to nominating committee are the most significant constraints to earnings management. These results recommend us to deduce that Governance instruments affect earnings management decision and control efficiency depends on: (1) Board size that should be neither too large nor too small in order to avoid diverting opinions that profit the manager and allow earnings management. (2) Auditing committee independency is necessary to deal with manager’s opportunistic behavior and earnings manipulation. (3) A separation function, which means that manager should not be at the same time Chairman, is also necessary to have an optimal governance system and to avoid earnings management. (4) Nominating committee independency and non manager membership are required to succeed corporate governance mechanisms. Keywords: Earnings management, CEO, Board of directors, auditing committee, nominating committee, and ownership structure. 1. Introduction The last few years witnessed a series of accounting and financial scandals 1 leading investors to discredit financial information. In fact, sudden firms’ bankruptcies led investors to devote more interest 1 Enron, WorldCom, Xerox…