Search results

The purpose of this paper is to investigate the spillover effects of a bright-line disclosure regulation that required Chinese listed firms to provide earnings forecasts if they anticipated specified, large earnings changes.

The paper examines the discontinuity of the earnings change distribution of firms listed on the Shenzhen Stock Market between 2010 and 2014. The paper finds that firms no longer subject to the bright-line test still exhibited discontinuity in earnings change distribution. The discontinuity lasted for at least three years with magnitude comparable to that of the firms still subject to the bright-line test. In addition, newly listed firms that had never experienced the bright-line test showed similar tendency to avoid the same threshold. There is some evidence that these firms’ avoidance of the −50 per cent changes was partly because of market pressure.

Research on bright-line tests has to date focused on their immediate and direct effects on firms currently subject to such tests. This study finds that a bright-line disclosure regulation’s influence is not limited to the firms directly governed by the regulation. It could lead to widespread and long lasting distortions in financial reporting behaviors of firms not currently subject to such tests.

The paper has implications for regulators who study the economic consequences of bright-line regulations in general and analysts of the Chinese capital market in particular.

This is the first empirical report that bright-line disclosure regulations affected the financial reporting behavior of firms that were not directly subject to the bright-line tests.

Charting the earnings numbers reported by Korean firms produces a bell curve, but for a sharp discontinuity in the area surrounding zero. The purpose of this paper is to investigate if and how a large segment of Korean managers might manage accounting numbers to produce the observed result.

This study adopts an empirical research method using Korean listed firms as a sample. The primary focus of investigation is on major income statement variables that might produce the observed results in earnings from operations and net income.

Managers of Korean firms opportunistically use almost all income statement variables to influence earnings numbers. They manage revenues and selling, general & administrative expenses to report small positive earnings from operations, but manage non-operating gains (losses) to report small positive net income.

This paper does not answer several questions related to loss avoidance. First, the paper did not examine which actions, such as discretionary accruals, opportunistic business decisions, or bogus transactions, were employed to affect line items on the income statement. Second, the paper did not investigate what specific incentives trigger Korean managers to report small positive earnings. Korean firms have traditionally raised capital by borrowing funds from creditors and governmental agencies. Thus, they may be concerned that reporting losses would reduce their borrowing capacity. Finally, corporate governance, such as CEO tenure and option grants may influence the extent of earnings management to avoid losses, but most corporate governance data for Korean companies must be manually collected. Accordingly, these subjects are left for future studies as well.

This study contributes to accounting literature by reporting how managers of Korean firms artificially coordinate major income statement variables and report small positive earnings figures, noting the differences between earnings management investigating methodology and ones used in previous studies.

The purpose of this paper is to understand the impact of tenure on earnings management.

Analytical model; multivariate regression analysis.

The paper predicts that managers are conservative in managing earnings when they first start to take top managerial positions, and then become aggressive in the next few years. Once they reach the maximum level of earnings management, they will become conservative again and report earnings less aggressively. This inverted U-shaped relationship between tenure and earnings management is confirmed by the data from the Chinese stock market.

It is based on China stock market data. Generalization of the research results to other countries is limited.

With the knowledge of when earnings management is more likely to occur, regulators can set up policies targeting firms and managers with certain characteristics, instead of requiring observances from all firms and managers. This limited scope can greatly reduce the costs of preventing and identifying earnings management, while effectively maintaining the quality of earnings in the meantime.

This paper examines the earnings management behavior related to CEO tenure. It is hoped that the research results can improve the overall understanding of earnings management, then social wealth spent on preventing and identifying it could be reduced.

It is an original work.

In 2001 Enron filed amended financial statements setting off a chain of events starting with its bankruptcy filing and including the conviction of Arthur Andersen for obstruction of justice. The end of 2001 and the first half of 2002 included a heightened level of publicity for the accounting practices of listed companies. This paper addresses whether there was a detectable change in the incidence of earnings management around this time period. Earnings reports released in 2001 and 2002 were analyzed. The results showed that revenue numbers were subject to upwards management. Benford's Law was used to detect such manipulations. Earnings Per Share (EPS) numbers showed a marked discontinuity in the distribution around zero which is consistent with upwards management. The results also showed a tendency towards neat round EPS numbers such as 0.10, 0.20, etc. The overall results are consistent with a small but noticeable increase in earnings management in 2002. Enron's reported numbers are reviewed and these show a strong tendency towards making financial thresholds.

The work compares across cohorts and different levels of education the early-stage evolution of several labour market outcomes, with the aim of studying whether and to what extent education matters for the level, growth and stability of earnings.

By using a rich longitudinal dataset developed from merging survey and administrative data, this article describes the evolution of the early career – five years following the education completion – in Italy comparing differently educated workers born between 1970 and 1984.

The authors find evidence of an "education premium” during the first five years after education completion in terms of faster school-to-work transition, higher employability and higher earnings; moreover, education is associated with positive, faster and more volatile earnings growth, while for those experiencing a downward trend education does not appear to play any role. However, no clear-cut changes across cohorts in the association between the various outcomes and the level of education emerge, thus signalling that no continuous rise of skill premia in the first phase of the working career across cohorts characterises the Italian economy.

The main originality consists in investigating the early career stage by cohort and by the level of education with a focus on many multi-year individual outcomes. Besides investigating the evolution of aggregate outcomes for differently educated individuals born in different cohorts, the authors also focus on individual earnings dynamics along the five years after the education completion.

The purpose of this paper is to compare investment in innovation (e.g. R&D) between new venture start‐ups before commercialization and operating businesses after commercialization.

Real options methods were used to model a new venture start‐up as a perpetual call option on an operating business that grows with R&D. The operating business uses R&D to improve actual earnings while the start‐up uses R&D to improve prospective earnings. When the start‐up entrepreneur commercializes his/her new product, device, or service with conventional investment (e.g. plant, property, and equipment to begin production), prospective earnings convert into actual earnings.

The ability of the start‐up entrepreneur to avoid commercialization costs upon failed R&D makes R&D more valuable to the start‐up entrepreneur than to the manager of the already operating business (for whom commercialization costs are sunk) and despite R&D costs that the start‐up incurs without the revenues that only commercialization generates. The value of R&D to the start‐up can be so great that the entrepreneur invests in R&D before the manager of an otherwise similar operating business in similar business conditions.

Without favoring either a priori, the authors show that under broad circumstances, a new venture start‐up undertakes R&D before an already operating business. The authors also discuss the empirical implications of the results.

This paper starts from the observation that small businesses in France report a significant fraction of their net income in the form of non-core earnings. Consequently, the purpose of this paper is to examine the persistence and informativeness of both core and non-core earnings of small businesses listed on the Euronext Paris market.

Panel regressions estimated with heteroskedasticity robust standard errors are used to investigate the relationships between earnings components, future performance and stock market valuation of small businesses.

The findings show that core and non-core earnings of the current year (t), contrary to those of the previous year (t−1), make it possible to predict the performance of the next year (t+1). However, only the persistence of current core earnings is valued by the stock market.

The study puts forward an anomaly of market efficiency. Thus, it shows that investors in the French stock market do not appropriately price a part of the available financial information (i.e. non-core earnings) that may contribute to a better assessment of the future performance of listed small businesses.

The persistence of non-core earnings is certainly less important than that of core elements but able to help investors appraise the future performance of listed small businesses. Hence, it represents useful financial information for investors.

This paper contributes to the existing literature by investigating the relationships between earnings, future performance and stock market valuation of listed SMEs, especially. Thus, the findings of this research allow a better understanding of earnings components properties (i.e. persistence) and their implication on the stock market valuation (i.e. informativeness) of listed SMEs. Given the observed specificities of earnings for this category of firms, these findings may be of particular interest to both researchers and investors.

This study aims to investigate the opacity of bank assets because of the International Financial Reporting Standard (IFRS) 9 implementation. It highlights that the Asian-Pacific countries’ banking industries are experiencing economic volatility. In other words, it examines information asymmetries because of the standards requiring a mechanistic treatment. Thus, this focuses on the tragedy of the commons (ToTC) caused by the implementation of the standard.

This research selects a sample of banking firms in the Asia-Pacific region from 2010 to 2021. Furthermore, it examines the impacts of IFRS 9’s implementation on earnings forecasts and share-return conveyances. This research first uses the OLS regression for examining the bank assets’ opacities, which may affect future earnings and information conveyancing. Second, it arranges these opacities, earnings and stock returns with the 2-SLS regression to find the staging associations because of hierarchical relevances.

This study finds that bank assets’ opacity is caused by a standard’s implementation, which is a ToTC, and this study signifies its first occurrence. Simultaneously, it recognises an information asymmetry because of the implemented procedural calculation mandated by the standard. Furthermore, these opacities affect future earnings and information conveyancing that inherited information asymmetries, which have affected them as the second ToTC. Finally, current and future earnings as a consequent impact of asset opacity are recursively associated with stock return conveyancing as the third ToTC.

This study demonstrates hierarchical information about bank asset opacities, starting by recognising and measuring them in financial statements. Then, these recognised and measured asset opacities are associated with current and future earnings, ending on the ordinarily and staged influencing of stock return conveyancing. Moreover, it reveals hierarchical information in the direct-ordinarily and staged associations among bank asset opacities, earnings and return conveyances. Thus, these associations are valid and occur because of the mandates of the standard’s measurement.

The paradigm of school-to-work transition is changing, with an increasing number of students combining work and study. Furthermore, there exists some mixed evidence for the impact of student employment on future earnings and employment likelihood. The purpose of the present paper is to examine additional evidence that would shed light on the pros and cons of student work as a function of its type (i.e. whether or not it matches the student's field of study). We also discuss practical implications for specialists who facilitate the transition of graduates to the job market.

This is a quantitative study based on the National Statistical Survey of Graduate Employment (SGE) conducted by the Russian Federal State Statistic Service (Rosstat) in 2016. Statistical methods of data analysis were used (logistic regression, Mincer equations). The analysis is based on two dependent variables as follows: data on graduates' employment and their monthly earnings.

We show that student work is a predictor of higher employment chances for both university and vocational college graduates. Moreover, the highest employment chances are associated with student work that is well-matched to the field of study. As for earnings, the greatest returns are again associated with work related to education. Jobs unrelated to education significantly correlate with earnings only for university graduates.

An important limitation of the present research is that it estimates the effects of student employment over a rather short-term period by using data on employment just after graduation and only starting salaries. These findings evoke the need for further study of graduate competencies and the process of their acquisition.

Our findings suggest some directions for education development. The results can be used to analyze governmental and other stakeholders' initiatives in the field of vocational and higher education.

The research results can be used by a wide range of stakeholders interested in the employment of graduates as a source of data for designing measures for improving graduates' employability.

Our study obtained data on the impact of student work on later employment. Tertiary graduates get returns from all work experience, while VET graduates earn more only if their student employment was consistent with their field of study.

The purpose of this paper is to investigate the impact of agency risk implied in case of personal debt obtained by promoters through pledging of their stock on accrual and real earnings management practices.

In this paper abnormal accruals, as suggested in Dechow et al. (1995), and the real earnings management proxies as indicated in Dechow et al. (1998) and Roychowdhury (2006) are used. OLS regression is run over 29,054 firm-years of Indian companies starting from the year 2008 to 2016. Then the occurrence of earnings management is tested in firms in year t where promoters pledge/release their holdings from the pledge in year t+1.

The findings suggest that earnings management increases in the prior year with an increase in the proportion of promoters’ stock pledge in the subsequent year. The authors find evidence for increased earnings management through accruals and also for real earnings management using abnormal cash flows and abnormal discretionary expenses. However, the authors do not find real earnings management using abnormal production cost as a measure.

The paper has considerable implications on managerial behavior toward earnings management because of the flexibility managers have in applying accounting policies and authority in operating decisions under domestic GAAP, and IFRS and earnings are prone to management tactics, fostering agency risk when they relate to the welfare of decision makers.

This paper addresses the consequences of individual borrowing of promoters collateralized by their stake in the firm, which is a global phenomenon, on reporting quality.