Real earnings management and the cost of new corporate bonds

ABSTRACT Anecdotal research suggests that management is concerned about how Data Security Breaches (DSBs) impact a firm's financial performance. We investigate: whether managers in DSB firms manipulate earnings through real earnings management (REM) and/or accrual-based earnings management (AEM); how breach type, disclosure delay, and external monitoring impact earnings management activities; and how earnings management activities influence a DSB firm's performance. Using a propensity score matched sample, results suggest that DSB firms are more likely to manipulate earnings via REM, but not AEM. Additionally, we find that DSB firms engage in REM through cutting discretionary expenses, decreasing discretionary cash spending, and reducing the cost of goods sold through overproduction. We find some evidence that firms are more likely to increase REM when DSBs involve financial information or when firms delay the DSB disclosure or have low analyst coverage. We provide evidence that REM activities lead to lower subsequent performance in DSB firms. Data Availability: The data used are publicly available from the sources cited in the text.

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Real earnings management and the cost of debt capital: international evidence

Asia-Pacific Journal of Accounting & Economics ◽

10.1080/16081625.2018.1518148 ◽

2018 ◽

Vol 27 (2) ◽

pp. 151-172 ◽

Cited By ~ 3

Author(s):

Ji Hye Kim ◽

Sang Ho Lee ◽

Yong Keun Yoo

Keyword(s):

Earnings Management ◽

Real Earnings Management ◽

Cost Of Debt ◽

International Evidence ◽

Debt Capital ◽

The Cost

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The Relationship between Real Earnings Management and Cost Behavior

SEISENSE Journal of Management ◽

10.33215/sjom.v2i6.244 ◽

2019 ◽

Vol 2 (6) ◽

pp. 65-77

Author(s):

Bismark Yiadom Boakye ◽

Francis Atiso ◽

Elvis Koranteng

Keyword(s):

Earnings Management ◽

Stock Exchange ◽

Study Data ◽

Real Earnings Management ◽

Doing Business ◽

Cost Behavior ◽

Regulatory Bodies ◽

The Cost ◽

Ghana Stock Exchange ◽

The Relationship

Purpose- This research aims to examine the relationship between real earnings management (REM) and sticky Selling General and Administrative (SG&A) costs in the case of a developing economy. Design/Methodology- The study employed a purposive sampling method. Fifteen firms listed on Ghana stock exchange were selected for the study. Data from the period of 2005 to 20014 were collected. Findings- The study finds Ghanaian listed firm's SG&A cost to be sticky and also see these firms to manipulate earnings through REM. This study finds that REM through discretionary expenses and production cost increases sticky SG&A cost, whereas REM through cash flow reduces sticky SG&A cost. Overall, the results imply that REM exhibit sticky cost. Practical Implications- The study informs managers that cost is not only fixed or variable but also behaves asymmetrically. The understanding of this concept could help managers to implement strategies that will lower the cost of doing business. Also, since some managers deliberately make decisions that lead to real earnings management and sticky cost, we, therefore, believe that this research will be of importance to regulatory bodies, policymakers, investors, and other stakeholders.

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Country-level Risk and the Tradeoff between Real Earnings Management and Accrual Earnings Management: Evidence from Pakistan

NUST Business Review ◽

10.37435/nbr-20-0018 ◽

2021 ◽

Vol 2 (2) ◽

pp. 1-20

Keyword(s):

Earnings Management ◽

Fixed Effects ◽

Simultaneous Equation ◽

Least Square ◽

Real Earnings Management ◽

Future Research ◽

Firm Level ◽

Political Risks ◽

Country Level ◽

The Cost

The aim of this study is to understand whether real earnings management (REM) and accruals earnings management (AM) can be used as substitute of one another in the context of Pakistan. Additionally, we also examine the effect of country-level political risk on earnings management. To achieve our desire objectives, we used a panel sample of 197 Pakistani firms for a period of 13 years (2007-2019). To measure REM, we follow Roychowdhury (2006) and to measure AM, we follow Jones (1991) and modified Jones (1995) model. For data analysis, we used simultaneous equation modelling and ordinary least square (OLS) regression with time and firm fixed effects. The results indicate that when the cost associated with REM(AM) increases, the firm’s inclination towards AM(REM) decreases which suggests that managers use both REM and AM approaches as substitutes of one another. Further, the results show that country-level political risks positively affect real REM while it has insignificant effect on AM. Moreover, the adoption of IFRS as accounting standards does not have any effect on the earnings management in Pakistan. This study can be extended to firm-level risk factors to examine their role in earnings management. Moreover, how manager use to adopt REM and AM in the highly regulated industries i.e., financial and services industries, also provides a promising opportunity for future research.

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PENGARUH MANAJEMEN LABA RIIL TERHADAP PERINGKAT DAN PREMI PENERBITAN OBLIGASI KORPORASI

Jurnal Akuntansi ◽

10.24912/ja.v20i2.60 ◽

2017 ◽

Vol 20 (2) ◽

pp. 301

Author(s):

Aries Wicaksono Anthony ◽

Budi Frensidy

Keyword(s):

Earnings Management ◽

Cash Flow ◽

Corporate Bonds ◽

Real Earnings Management ◽

Yield Spread ◽

Bond Rating ◽

Operating Cash Flow ◽

Observation Period

Penelitian ini bertujuan untuk mengetahui pengaruh antara manajemen laba riil terhadap peringkat dan premipenerbitan obligasi perusahaan yang terdaftar di BEI dalam periode observasi 2009-2013. Penelitian ini menggunakan 40 perusahaan dengan sampel observasi obligasi sebanyak 92 obligasi. Model yang digunakan dalam penelitian ini mengikuti model yang digunakan dalam penelitian Ge dan Kim (2014). Penelitian ini memberikan hasilbahwa arus kas operasiyang semakin tinggi disebabkan manipulasi penjualanakan berpengaruh signifikan terhadapperingkat obligasi yang lebih baik dan manajemen laba riil tidak memiliki pengaruh yang signifikan terhadap yieldspread.This study aims to determine the effect of real earnings management towardsrating and yield spread of new corporate bonds listed on the BEI within the observation period 2009-2013. This study used sample of 40 companies with 92bonds observations. The model used in this study follows the model used in the research Ge and Kim (2014). This study provides results that higher level of operating cash flow from sales manipulation will significantly influence better bond rating and real earnings management has no significant effect on yieldspread.

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EARNINGS MANAGEMENT AND FUTURE EARNINGS

Jurnal Akuntansi dan Keuangan Indonesia ◽

10.21002/jaki.2019.08 ◽

2019 ◽

Vol 16 (2) ◽

pp. 141-164

Author(s):

Alex Johanes Simamora ◽

Keyword(s):

Earnings Management ◽

Market Share ◽

Stock Exchange ◽

Real Earnings Management ◽

Financial Health ◽

Future Earnings ◽

Auditor Quality ◽

Effect Regression ◽

Negative Effect ◽

The Cost

Abstract This research is aimed to examine the moderating effect of the cost of earnings management on the relationship between earnings management and future earnings. Research samples are manufacture companies listed in Indonesia Stock Exchange 2013-2015. The cost of accruals earnings management is auditor quality, while the costs of real earnings management are the market share and financial health. Based on the fixed effect regression test, auditor quality strengthens the positive effect of accruals earnings management on future performance, while market share and financial health weaken the negative effect of real earnings management on future earnings. It indicates that in the context of efficient contracting, high quality auditor provide better signal for earnings prediction compared to the low quality auditor. In addition, higher market share and higher financial health limit opportunistic real earnings management to reduce future earnings.

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The Effects of Tax Avoidance, Accrual Earnings Management, Real Earnings Management, and Capital Intensity on the Cost of Equity

Jurnal Dinamika Akuntansi ◽

10.15294/jda.v10i1.12976 ◽

2018 ◽

Vol 10 (1) ◽

pp. 40-50

Author(s):

Amrie Firmansyah ◽

Ahmad Sigid Febriyanto

Keyword(s):

Earnings Management ◽

Stock Exchange ◽

Tax Avoidance ◽

Multiple Linear Regression Model ◽

Sampling Technique ◽

Capital Intensity ◽

Real Earnings Management ◽

Cost Of Equity ◽

Management Actions ◽

The Cost

This study aims to examine the effects of tax avoidance, accrual profit management, real profit management, and capital intensity on equity costs. The population of this study is a manufacturing company listed on the Indonesia Stock Exchange which amounted to 146 companies. The sampling technique used was purposive sampling and resulted in 420 units of analysis. This type of research is quantitative causality by performing hypothesis testing analysis is done by using multiple linear regression model. The findings of this research are tax avoidance will add to the risks that must be borne by investors thus increasing uncertainty over their investment. Investors consider that accrual profit management actions are opportunistic as risk-taking actions as well as real profit management actions. While on Capital Intensity, investors assume the information on the company’s fixed assets is not useful in making investment decisions. The conclusions that can be taken are tax avoidance, accrual profit management, and earnings management real positive to the cost of equity. However, capital intensity has a negative effect.

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The Effects of Tax Avoidance, Accrual Earnings Management, Real Earnings Management, and Capital Intensity on the Cost of Equity

Jurnal Dinamika Akuntansi ◽

10.15294/jda.v10i1.12653 ◽

2018 ◽

Vol 10 (1) ◽

pp. 71-81 ◽

Cited By ~ 2

Author(s):

Raka Adhi Prasetya ◽

Agung Yulianto

Keyword(s):

Earnings Management ◽

Carbon Emissions ◽

Carbon Emission ◽

Stock Exchange ◽

Linear Regression Analysis ◽

Tax Avoidance ◽

Capital Intensity ◽

Multiple Linear Regression Analysis ◽

Real Earnings Management ◽

The Cost

This study aims to analyze the influence of PROPER Rating, Industrial Type, Profitability, Leverage and Age of Company on Carbon Emission Disclosure. Measurement of carbon emissions disclosure uses Carbon Emission Disclosure Checklist (CED). The population of this study is non-financial companies listed on the Indonesia Stock Exchange in 2013 - 2016 as many as 406 companies. The technique used in sampling is purposive sampling and selected 32 companies as sample and 126 units of analysis. The analytical tool used to test the hypothesis is descriptive statistical analysis and multiple linear regression analysis processed through IBM SPSS 21 program. The research results show that the PROPER rating and the type of industry have positive effect on carbon emission disclosure. While profitability, leverage and age of the company have no effect on carbon emission disclosure. The conclusions of this study are the PROPER rating and the type of industry proven to influence the company’s decision making to disclose carbon emissions. While the profitability, leverage, and firm age cannot affect the company’s decision to disclose carbon emissions.

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