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Open Access
Article
Publication date: 8 April 2022

Riyan Harbi Valdiansyah and Etty Murwaningsari

Discretionary accruals are earnings quality proxies that illustrate that the greater the value of discretionary accruals, the greater the practice of earnings management and vice…

2096

Abstract

Purpose

Discretionary accruals are earnings quality proxies that illustrate that the greater the value of discretionary accruals, the greater the practice of earnings management and vice versa. High-quality financial reports (especially earnings quality) are expected to help investors and potential investors to make decisions. This study analyses the factors that affect earnings quality, such as pre-managed earnings, liquidity and efficiency. Furthermore, the authors identify the moderating effect of the governance mechanisms proxied by the proportion of independent commissioners in conventional commercial banks listed on the Indonesia Stock Exchange.

Design/methodology/approach

This study uses 226 banking data in the pre-corona crisis period 2013 until 2019. The data were analyzed using EViews 10 for hypothesis and MS Excel for a differential test.

Findings

The results show that pre-managed earnings, liquidity and efficiency affect earnings quality. The governance mechanisms can moderate liquidity and efficiency on earnings quality, while pre-managed earnings cannot be moderated. The different bank categories (BUKU) of earnings management mechanisms are shown for each BUKU (BUKU 1, 3 and 4 perform earnings management by increasing earnings, BUKU 2 lowering earnings). Another thing is information on the earnings quality between BUKU 2 with BUKU 3 and BUKU 4 because of differences in capital and bank operating coverage regulations.

Research limitations/implications

Further research expects to analyze the factors affecting banking earnings quality concerning applying IFRS 9 (PSAK 71) in Indonesia. Future researchers expect to apply mixed methods to verify the financial statement data and provide comprehensive discussion and genuine insight from their study. Future research requires more samples from companies or an international scale (cross country) to obtain maximum results and be generally accepted.

Practical implications

This study implies that managers should have more control over pre-managed earnings and bank liquidity as manager's incentive to do earnings smoothing. Managers should also pay attention to cost-efficiency and effective implementation of governance mechanisms to maximize earnings quality. This study also implies that policymakers can encourage commercial banks to apply more prudential principles in terms of a reserve for failed loans to minimize earnings management in banking.

Originality/value

The significance of this study revealed in the discussion of the difference test between bank core capital categories (BUKU) and its relation to earnings quality.

Details

Asian Journal of Accounting Research, vol. 7 no. 3
Type: Research Article
ISSN: 2443-4175

Keywords

Open Access
Article
Publication date: 8 February 2024

Peter Ngozi Amah

A stylized fact in finance literature is the belief in positive relationship between ex ante return and risk. Hence, a rational investor, by utility preference axiom can only…

Abstract

Purpose

A stylized fact in finance literature is the belief in positive relationship between ex ante return and risk. Hence, a rational investor, by utility preference axiom can only consider committing fund in asset which promises commensurate higher return for higher risk. Questions have been asked as to whether this holds true across securities, sectors and markets. Empirical evidence appears less convincing, especially in developing markets. Accordingly, the author investigates the nature of reward for taking risk in the Nigerian Capital Market within the context of individual assets and markets.

Design/methodology/approach

The author employed ex post design to collect weekly stock prices of firms listed on the Premium Board of Nigerian Stock Exchange for period 2014–2022 to attempt to answer research questions. Data were analyzed using a unique M Vec TGarch-in-Mean model considered to be robust in handling many assets, and hence portfolio management.

Findings

The study found that idea of risk-expected return trade-off is perhaps more general than as depicted by traditional finance literature. The regression revealed that conditional variance and covariance risks reveal minimal or no differences in sign and sizes of coefficients. However, standard errors were also found to be large suggesting somewhat inconclusive evidence of existence of defined incentive structure for taking additional risk in the market.

Originality/value

In terms of choice of methodology and outcomes, this research adds substantial value to body of knowledge. The adapted multivariate model used in this paper is a rare approach especially for management of portfolios in developing markets. Remarkably, the research found empirical evidence that positive risk-expected return trade-off, as known in mainstream literature, is not supported especially using a typical developing country data.

Details

IIMBG Journal of Sustainable Business and Innovation, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2976-8500

Keywords

Open Access
Article
Publication date: 22 May 2023

Edmund Baffoe-Twum, Eric Asa and Bright Awuku

Background: Geostatistics focuses on spatial or spatiotemporal datasets. Geostatistics was initially developed to generate probability distribution predictions of ore grade in the…

Abstract

Background: Geostatistics focuses on spatial or spatiotemporal datasets. Geostatistics was initially developed to generate probability distribution predictions of ore grade in the mining industry; however, it has been successfully applied in diverse scientific disciplines. This technique includes univariate, multivariate, and simulations. Kriging geostatistical methods, simple, ordinary, and universal Kriging, are not multivariate models in the usual statistical function. Notwithstanding, simple, ordinary, and universal kriging techniques utilize random function models that include unlimited random variables while modeling one attribute. The coKriging technique is a multivariate estimation method that simultaneously models two or more attributes defined with the same domains as coregionalization.

Objective: This study investigates the impact of populations on traffic volumes as a variable. The additional variable determines the strength or accuracy obtained when data integration is adopted. In addition, this is to help improve the estimation of annual average daily traffic (AADT).

Methods procedures, process: The investigation adopts the coKriging technique with AADT data from 2009 to 2016 from Montana, Minnesota, and Washington as primary attributes and population as a controlling factor (second variable). CK is implemented for this study after reviewing the literature and work completed by comparing it with other geostatistical methods.

Results, observations, and conclusions: The Investigation employed two variables. The data integration methods employed in CK yield more reliable models because their strength is drawn from multiple variables. The cross-validation results of the model types explored with the CK technique successfully evaluate the interpolation technique's performance and help select optimal models for each state. The results from Montana and Minnesota models accurately represent the states' traffic and population density. The Washington model had a few exceptions. However, the secondary attribute helped yield an accurate interpretation. Consequently, the impact of tourism, shopping, recreation centers, and possible transiting patterns throughout the state is worth exploring.

Details

Emerald Open Research, vol. 1 no. 5
Type: Research Article
ISSN: 2631-3952

Keywords

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