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Article
Publication date: 2 March 2012

Wang Lin and Men Rong

The purpose of this paper is to verify whether the disclosure of other comprehensive income has effectively improved the transparency of corporate disclosure and thus effectively…

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Abstract

Purpose

The purpose of this paper is to verify whether the disclosure of other comprehensive income has effectively improved the transparency of corporate disclosure and thus effectively reduced earnings management.

Design/methodology/approach

In total, 391 valid samples are selected from more than 860 listed companies of Shanghai A shares in 2009, excluding finance and insurance categories, those with incomplete data and samples whose other comprehensive income is zero.

Findings

The results show that other comprehensive income has played an important role in all comprehensive income and significantly affected earnings management. The disclosure of other comprehensive income is negatively related to earnings management, that is, disclosure of other comprehensive income can curb earnings management to some extent in order to make the public better understand the performance of a given company.

Research limitations/implications

Owing to the short period of time for the issuance of Accounting Standards No. 3, there are fewer comparable data. Besides, only companies from Shanghai A shares during 2009 are surveyed without Shenzhen Share. Finally, there should be a dialectic and mutual relation between earnings management and other comprehensive income.

Practical implications

The paper's findings suggest that it is necessary to carry out the disclosure to improve the transparency of the accounting information, so as to curb earnings management and improve earnings quality to some extent, which provides valuable reference for the government's decision.

Originality/value

Finance [2009] 8 on the issuance of Accounting Standards No. 3 issued by Ministry of Finance Republic of China in June 2009 explained that all listed companies are required to disclose “comprehensive income” and “other comprehensive income” under the item “earnings per share” in the income statement. Based on the 2009 annual report of listed companies, the paper elaborates descriptive statistics related to the composition of other comprehensive income. Empirical research is conducted to verify the effect of the new policy. In a word, the paper selects a big number of samples to conduct the study in order to make more valuable reference.

Details

Nankai Business Review International, vol. 3 no. 1
Type: Research Article
ISSN: 2040-8749

Keywords

Book part
Publication date: 9 June 2020

Anna Purwaningsih and Indra Wijaya Kusuma

This study examines associations between accrual earnings management (AEM) and real earnings management (REM), and earnings quality between countries considered under insider…

Abstract

This study examines associations between accrual earnings management (AEM) and real earnings management (REM), and earnings quality between countries considered under insider economics and outsider economics clusters. Countries included in the outsider economics cluster are Singapore, Malaysia, and Hong Kong. Meanwhile, countries included in the insider economics cluster are Indonesia, the Philippines, and South Korea. Earnings management practices have changed from AEM to REM since the publication of the Sarbanes Oxley Act and DFA 954 implementation of the Claws back provision policy in the United States.

Research data were obtained from the Bloomberg database, 2010–2016. Regression analysis and t-test were utilized. This study compared AEM and REM to determine which is stronger based on country clusters, as well as the association between AEM or REM and earnings quality.

The results of this study indicate that AEM and REM are associated with the quality of earnings in the insider economics cluster. However, AEM and REM are not associated with earnings quality in the outsider economics cluster. Furthermore, associations between AEM and earnings quality are stronger than associations between REM and earnings quality in insider economics cluster.

Article
Publication date: 1 January 2004

Ahmed Riahi‐Belkaoui

Based on the idea that insiders (i.e., managers and controlling shareholders) engage in earnings management to mask their diversion and rent seeking activities from outsiders…

Abstract

Based on the idea that insiders (i.e., managers and controlling shareholders) engage in earnings management to mask their diversion and rent seeking activities from outsiders, this paper presents international evidence supporting both a “diversion hypothesis” where earnings management is decreasing in economic freedom, and a “penalty hypothesis” where earnings management is increasing in human development.

Details

Review of Accounting and Finance, vol. 3 no. 1
Type: Research Article
ISSN: 1475-7702

Article
Publication date: 9 February 2024

Alexandre Esteves and Pedro Piccoli

The purpose of this study is to investigate the influence of firm-specific investor sentiment on Brazilian companies’ accrual-based earnings management between 2010 and 2018. The…

Abstract

Purpose

The purpose of this study is to investigate the influence of firm-specific investor sentiment on Brazilian companies’ accrual-based earnings management between 2010 and 2018. The paper aims to bring deeper insight into the relationship between the investor expectations and managers’ decision-making in an emerging market.

Design/methodology/approach

The authors use the quantitative approach and apply a multiple linear regression model to test the relationship among the abnormal accruals, the firm-specific investor sentiment index and the control variables. The final sample includes data from 175 companies, between 2010 and 2018.

Findings

These results reveal a negative association between firm-specific investor sentiment and accrual-based earnings management, which could mean that the risk propensity of managers to manipulate earnings increases when they face known losses in the capital market.

Research limitations/implications

The research findings provide a valuable understanding of how emerging capital market expectations can influence managerial decisions, such as accrual-based earnings management. The geographical area of study was limited to only Brazil.

Originality/value

Previous studies on developed markets show that market-wide investor sentiment positively influences accrual-based earnings management. However, the present study shows that the firm-specific investor sentiment index has a significant and negative relationship with Brazilian companies’ earnings manipulation, whereas market sentiment indicates contradictory relationship in previous studies in the country.

Propósito

El propósito de este estudio es investigar la influencia del sentimiento de los inversionistas a nivel de empresa en la manipulación contable de las empresas brasileñas entre 2010 y 2018. El documento pretende aportar una visión más profunda sobre la relación entre las expectativas de los inversores y la toma de decisiones de los gestores en un mercado emergente.

Diseño/metodologia/enfoque

usamos el enfoque cuantitativo y aplicamos un modelo de regresión lineal múltiple para probar la relación entre las acumulaciones anormales, el índice de sentimiento de los inversores a nivel de empresa y las variables de control. La muestra final incluye datos de 175 empresas, entre 2010 y 2018.

Hallazgos

Los resultados revelan una asociación negativa entre el sentimiento de los inversores a nivel de empresa y la manipulación contable basada em acumulaciones, lo que podría significar que la propensión al riesgo de los administradores a manipular las ganancias aumenta cuando enfrentan pérdidas conocidas en el mercado de capitales.

Limitaciones/implicaciones de la investigación

los resultados de la investigación proporcionan una valiosa comprensión de cómo las expectativas de los mercados de capitales emergentes pueden influir en las decisiones de gestión, como la manipulación contable basada en acumulaciones. El área geográfica de estudio se limitó únicamente a Brasil y, en consecuencia, los hallazgos y conclusiones del estudio tuvieron sus límites.

Originalidad/valor

estudios anteriores sobre mercados desarrollados muestran que el sentimiento de los inversores a nivel de mercado influye positivamente en la manipulación contable. Sin embargo, el presente estudio muestra que el índice de sentimiento de los inversores a nivel de empresa tiene una relación significativa y negativa con la manipulación de las ganancias de las empresas brasileñas, mientras que el sentimiento del mercado indica una relación contradictoria en estudios anteriores en el país.

Details

Academia Revista Latinoamericana de Administración, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1012-8255

Keywords

Open Access
Article
Publication date: 27 February 2024

Aklima Akter, Wan Fadzilah Wan Yusoff and Mohamad Ali Abdul-Hamid

This study aims to see the moderating effect of board diversity on the relationship between ownership structure and real earnings management.

Abstract

Purpose

This study aims to see the moderating effect of board diversity on the relationship between ownership structure and real earnings management.

Design/methodology/approach

This study uses unbalanced panel data of 75 listed energy firms (346 firm-year observations) from three South Asian emerging economies (Bangladesh, India, and Pakistan) from 2015 to 2019. The two-step system GMM estimation is used for data analysis. This study also uses fixed effect regression to obtain robust findings.

Findings

The findings show that firms with a greater ownership concentration and managerial ownership significantly reduce real earnings management. In contrast, the data refute the idea that institutional and foreign ownership affect real earnings management. We also find that board diversity interacts significantly with ownership concentration and managerial ownership, meaning that board diversity moderates the negative link of the primary relationship that reduces real earnings management. On the other hand, board diversity has no interaction with institutional and foreign ownership, implying no moderating effect exists on the primary relationship.

Originality/value

To the best of the authors’ knowledge, this is unique research investigating how different ownership structures affect real earnings management in the emerging nations’ energy sector, which the earlier studies overlook. More specifically, this research focuses on how board diversity moderates the relationships between ownership structure and real earnings management, which could be helpful for future investors.

Details

Asian Journal of Accounting Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2459-9700

Keywords

Article
Publication date: 15 January 2024

Terry Harris

In this study, the author examines the effect of managers’ perception of product market competition on accruals and real earnings management.

Abstract

Purpose

In this study, the author examines the effect of managers’ perception of product market competition on accruals and real earnings management.

Design/methodology/approach

The author develops a new text-based measure of the emphasis managers place on product market competition by conducting a textual analysis of firms’ 10-K filings. Using this measure, the author conducts a battery of econometric analyses and robustness checks to investigate the impact of this measure of product market competition on measures of accruals and real earnings management.

Findings

This study finds robust evidence that when management perceives more competitive threats, they are more likely to engage in accruals-based earnings manipulation but are less likely to engage in real earnings management activity. The author argues that these findings are due to managers’ career concerns enticing them to manage earnings via accrual when competition is high, but that greater product market competition discourages real earning management activity as it can diminish firms’ competitiveness.

Practical implications

The findings of this paper have important policy and practical implications since it signals that managers’ perceptions of product market competition is able to affect accounting choices, information environments and economic outcomes in firms.

Originality/value

This study develops a new text-based measure of managers’ perception of product market competition with the aid of GPT-4. The author then using this measure provides firm-level evidence on how this relates to earnings management.

Details

Journal of Accounting Literature, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 25 January 2024

Adhitya Agri Putra and Doddy Setiawan

This research paper aims to examine the effect of chief executive officer (CEO) characteristics on earnings management.

Abstract

Purpose

This research paper aims to examine the effect of chief executive officer (CEO) characteristics on earnings management.

Design/methodology/approach

Research samples are manufacturing firms listed in the Indonesian Stock Exchange 2015–2021. CEO characteristics include narcissism, gender, age, tenure, experience, nationality and founding family status. Data analysis uses random-effect regression.

Findings

The result shows that higher narcissism CEOs have aggressive characteristics so they will be more likely to engage in accrual and real earnings management. Female CEOs, foreign CEOs and founding-family CEOs have higher monitoring and business ethics characteristics so they will be less likely to engage in accrual and real earnings management. CEOs with higher education levels have higher thinking complexity so they will be more likely to engage in accrual earnings management with higher regulator and auditor monitoring barriers than real earnings management. CEOs with financial and accounting experience are familiar with accounting standards and auditor monitoring barriers so they will be more likely to engage in accrual earnings management than real earnings management. On the other hand, there are no effects of CEO age and tenure on earnings management.

Originality/value

This research contributes to providing evidence of the effect of CEO characteristics on earnings management in a specific industry such as manufacturing firms and emerging markets such as Indonesia with the majority group firms being family firms.

Details

Corporate Governance: The International Journal of Business in Society, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1472-0701

Keywords

Book part
Publication date: 30 September 2003

Marybeth M Murphy and Joanne P Healy

Recent events have shown that earnings management is a significant problem in the business world and that the culture in place in many organizations may encourage managers to…

Abstract

Recent events have shown that earnings management is a significant problem in the business world and that the culture in place in many organizations may encourage managers to manipulate earnings. While prior research has shown that earnings management exists at the corporate level, it has not examined whether managers at the divisional level are motivated to manage earnings. The purpose of this study is to examine whether divisional managers will be more inclined to manage earnings in order to maximize personal wealth. The secondary research objective is to examine whether the information frame will impact discretionary management accounting decisions. Members of the Institute of Management Accountants participated in an earnings management study in which two conditions were manipulated. First, the annual compensation of subjects was contingent on whether target income was met or not met. Second, information about a potentially obsolete inventory item was framed as either positive or negative. Subjects were asked the likelihood they would write off the potentially obsolete inventory. Research findings support the earnings management hypothesis and indicate that managers are less likely to write off obsolete inventory when their compensation is impacted by the write-off. Study results also reveal that the manner in which the inventory information is framed may affect managers’ write-off decision. These results are important as they may indicate that earnings management is more pervasive throughout the organization than previously shown.

Details

Advances in Accounting Behavioral Research
Type: Book
ISBN: 978-1-84950-231-3

Book part
Publication date: 29 January 2024

Taqwa Al Mawaali, Omar Nasser Khamis Al Hashar, Noof Al Alawi, Tamanna Dalwai, Syeeda Shafiya Mohammadi and Maroua Ben Maaouia

This study investigates the impact of business strategy on earnings management practices for financial and non-financial firms in Oman. To assess the research objective, 430…

Abstract

This study investigates the impact of business strategy on earnings management practices for financial and non-financial firms in Oman. To assess the research objective, 430 firm-year observations from 2015 to 2019 were employed in the study. Using regression analysis, the findings suggest that differentiation strategy positively affects earnings management in financial sector firms. In addition, cost leadership strategy positively affects earnings management in non-financial sector firms. This indicates that business strategy is associated with company leaders managing their earnings while they are trying to survive through competition. These findings are useful for regulators, as they can introduce mechanisms to curb earnings management practices and instil more faith in investors.

Details

Digital Technology and Changing Roles in Managerial and Financial Accounting: Theoretical Knowledge and Practical Application
Type: Book
ISBN: 978-1-80455-973-4

Keywords

Abstract

Details

Research on Professional Responsibility and Ethics in Accounting
Type: Book
ISBN: 978-1-84855-377-4

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