Resumo

The governance mechanisms in credit unions must be aligned with the peculiarities of these institutions, since the cooperative members are both clients and partners of this entity (principal-principal relationship). In addition, in credit unions, the result is a very sensitive issue, since its variation can denote to the cooperative members that the institution is not stable and that the management is not fulfilling its role. In view of this, management may manage its results in the Income Smoothing modality to show greater stability for the cooperative community.

This article analyzes the relationship between cooperative governance and earnings management. In this way, this objective is based on the assumption that the variation of results can denote management inefficiency to the cooperative, which can motivate management to practice Income Smoothing in order to maintain more stable results. Thus, governance measures ensure more transparency and integrity of accounting reports.

Credit unions are institutions owned and managed by cooperative members. In this way, agency problems occur in a different way when compared to other organizations. Thus, corporate governance mechanisms must be adopted to manage agency conflicts. Faced with such peculiarities, cooperatives put greater pressure on the issue of transparency of results, and management may adopt income smoothing mechanisms to show stable results for the cooperative community.

As a methodology, a weighted least squares (WLS) model with corrected heteroscedasticity was applied to a sample composed of 92 single Brazilian credit unions. In addition, the cooperative governance proxy was measured using a 17-question binary questionnaire, where it is possible to calculate a cooperative governance index.

The results reveal that the cooperatives that make up the sample, in the year studied, show signs of income smoothing and that higher levels of governance would reduce the variation in net expenses with allowance for loan losses, in the sample and year surveyed.

The study sought to verify whether governance practices influence earnings management in Brazilian CU belonging to segmentation at level S4 in the year 2020. Thus, through a linear regression by Weighted Least Squares with corrected heteroscedasticity, it was possible to observe that the cooperatives that make up the sample, in the year studied, show signs of income smoothing and that higher levels of governance would reduce the variation in net expenses with allowance for loan losses, in the sample and year surveyed, thus confirming the research hypothesis.

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