scholarly journals Earnings Quality and Accruals over Company´S Life Cycle

2021 ◽  
Vol 92 ◽  
pp. 02043
Author(s):  
Lucia Michalkova
Keyword(s):  
Life Cycle ◽  
Earnings Management ◽  
Earnings Quality ◽  
Explanatory Power ◽  
Value Added ◽  
Specific Factor ◽  
Homogeneity Test ◽  
Qualitative Variable ◽  
Conservative Accounting ◽  
The Impact

Research background: The increasing number of bankruptcies and the growing risk of financial distress highlight the need for quality financial statements, conservative accounting or increase the need for quality tools to detect the occurrence of earnings management. However, the life cycle of a company affects financial performance and key aspects of earnings management, which examined in the international context only to a small extent. Purpose of the article: The paper examines the impact of the life cycle and country-specific factor on the value of discretionary accruals in the tourism sector in the Visegrad countries, which are among the most vulnerable sectors in the coming economic crisis. Methods: This study uses the method of two-way analysis of variance with interaction, while also testing the assumptions of the model by normality tests, homogeneity test and post hoc tests (Scheffé and Tukey methods). Findings & Value added: Earnings quality changes during the life cycle of a business; whereas in the first stages (introduction, growth) and in decline they use downward earnings management. On the contrary, mature and shake-out companies have enough positive earnings before taxes, which is a prerequisite for tax profit optimization. The level of earnings management in tourism varies significantly at different stages of the life cycle, but also in different countries. The results imply that the qualitative variable corporate life cycle in interaction with the country is an important explanatory variable, the implementation of which can improve the explanatory power of earnings management models in Central European developing countries.

scholarly journals The Impact of the Financial Stability on the Earnings Management Practices

2021 ◽  
Vol 129 ◽  
pp. 03028
Author(s):  
Anna Siekelova
Keyword(s):  
Earnings Management ◽  
Significant Relationship ◽  
Financial Stability ◽  
Management Practices ◽  
Pearson Correlation ◽  
Explanatory Power ◽  
Value Added ◽  
Academic Community ◽  
Financial Reports ◽  
The Impact

Research background: In recent years, the world economy has changed. Earnings management, as a modern phenomenon, plays an important role within the financial world under the condition of globalization. The academic community deals with the issue of the informative value of the reported financial results. The informative value of these results becomes questionable when we realize that managers have not only the motivation but also the ability to use the earnings management techniques to influence these results. Purpose of the article: The aim of the contribution is earnings management detection by using a model with the highest explanatory power, as well as verifying hypotheses about the existence of a statistically significant relationship between earnings management practices and financial stability within a sample of companies. Methods: Based on the results of the explanatory power examination, the modified Jones model is recommended for earnings management detection within the sample of V4 companies. Data were obtained from the Amadeus database. The sample contains 1,480 financial reports of companies from 2019 to 2017. Research is focused on V4 companies that have the sum of total assets higher than 2,000,000 EUR, as well as the sum of operating revenue is higher than 100,000 EUR. Also, the Pearson correlation coefficient was used to test the hypotheses about the existing statistically significant relationship between financial stability and earnings management practices. Findings & Value added: The article provides an overview of the earnings management issue within V4 countries. It examines the earnings management practices and the impact of financial stability on the level and direction of earnings management practices.

scholarly journals Does the life cycle affect earnings management and bankruptcy?

2021 ◽  
Vol 12 (2) ◽  
pp. 425-461
Author(s):  
Pavol Durana ◽  
Lucia Michalkova ◽  
Andrej Privara ◽  
Josef Marousek ◽  
Milos Tumpach
Keyword(s):  
Life Cycle ◽  
Earnings Management ◽  
Financial Performance ◽  
Financial Management ◽  
Mixed Model ◽  
Value Added ◽  
Bankruptcy Risk ◽  
Corporate Life Cycle ◽  
The Impact

Research background: Deteriorating economic conditions and a negative outlook increase the pressure on financial management and the need to show high financial performance. According to Positive Accounting Theory, the growing risk of bankruptcy is associated with the phenomenon of earnings management. Bankruptcy risk and the quality of reported profits, along with other aspects of financial performance, vary throughout the company's life cycle. Nevertheless, these factors or their interactions are investigated only to a very small extent. Purpose of the article: The aim of this study is to clarify the impact of corporate life cycle and bankruptcy on earnings management, in order to describe behaviour of companies at different stages of corporate life cycle. Methods: A hierarchical mixed model with a random time and industry effect was chosen as appropriate because it allows the investigation of multilevel data that is not independent. The sample covers the financial indicators of more than 33,000 Central European companies from 2015?2019. The non-sequential Dickinson model, company age, and three models of accrual earnings management were used as proxies for the company's life cycle and quality of reported profit. Findings & value added: Earnings management and bankruptcy risk have a U-shape, indicating that financially distressed firms reduce reported accounting profit at the Introduction, Decline and, to a lesser extent, at the Growth stage. Slovak and Czech companies manipulate profits to a similar extent, Hungarian companies increase accounting profit to a greatest extent than the surveyed countries by controlling bankruptcy ? life cycle effect; however, the variability of accounting manipulations across industries has not been demonstrated. These findings imply that start-ups and declining businesses provide crooked financial statements to obtain more favourable debt covenants, and estimating discretionary accruals using life-cycle subsamples can improve the predictive power of accrual earnings management models.

scholarly journals Relationship between Earnings Management and Earnings quality in the Globalized Business Environment

2021 ◽  
Vol 92 ◽  
pp. 02011
Author(s):  
Juraj Cug ◽  
Aneta Cugova
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Negative Impact ◽  
Earnings Quality ◽  
Information Economics ◽  
Value Added ◽  
Cash Flows ◽  
Business Environment ◽  
Scientific Methods ◽  
High Level

Research background: Earnings management is a versatile phenomenon in firms’ financial reporting and It´s purpose is to demonstrate reasonable earnings quality. Thus, earnings management has much in common with earnings quality. Purpose of the article: This paper reviews earnings management and earnings quality in an information economics framework. We focus on earnings quality determinants, impact of earnings quality and the outcomes of earnings quality for companies. Methods: Basic scientific methods of analysis, synthesis, induction, deduction and abstraction were used to meet the stated goal. Findings & Value added: In general, earnings of high quality are those that have a high level of persistence, are more predictable, more timely, less volatile and have lower level of earnings management. Earnings management has a negative impact on the quality of earnings if it distorts the information in a way that is less useful for forecasting future cash flows.

scholarly journals The effect of executive compensation on earnings quality of conglomerates listed in Nigeria

2020 ◽  
Vol 3 (2) ◽  
pp. 6-18
Author(s):  
Abubakar Yayangida ◽  
◽  
Agbi Samuel ◽  
Joshua Okpanachi ◽  
Victor Atabo ◽  
...  
Keyword(s):  
Earnings Management ◽  
Executive Compensation ◽  
Key Words ◽  
Earnings Quality ◽  
Annual Reports ◽  
Listed Firms ◽  
Executive Incentives ◽  
Multiple Regression Technique ◽  
The Impact

This paper is an empirical analysis of the impact of Executive compensation on earnings quality of listed firms in Nigeria for the period of 2015-2019. The study adopts the multiple regression technique. Data were collected from the annual reports and accounts of sampled firms. The findings reveal that Executive compensation positively and significantly affect the earnings quality of listed Conglomerates in Nigeria, the result implies that firms that pay higher emoluments to its executive are likely to improve the quality of earnings. It is recommended that the listed Conglomerates firms should increase the amount paid as emoluments to their executives as the higher emolument paid and received by executives improve the level of earnings quality and reduces earnings management which may be detrimental to the goal and objectives of the firm. Key words: Compensation, Conglomerates, Executive, Incentives, Performance, Shareholders

Relationship between EVA (Economic Value Added) and Share Prices of Select Companies in BSE-SENSEX - An Empirical Study

2015 ◽  
Vol 4 (3and4) ◽  
Author(s):  
Mathangi Aravind ◽  
K. Ramya
Keyword(s):  
Performance Metrics ◽  
Explanatory Power ◽  
Economic Value ◽  
Value Added ◽  
Market Value ◽  
Economic Value Added ◽  
Share Prices ◽  
The World ◽  
The Impact ◽  
The Relationship

In todays competitive world, corporate companies all around the world are trying to maximize the wealth of their shareholders in order to gain market value as well as satisfy their stakeholders. With the gaining popularity of value based performance measures like Economic Value Added (EVA), Total Shareholder Return (TSR), Cash Value Added (CVA) etc., many corporate companies in India have started assessing their value in terms of these measures. This paper investigates the relationship between EVA and share prices of select companies in BSE-SENSEX for a period of six years from 2008 to 2013. The study focuses on the explanatory power of EVA with respect to share prices of the selected companies. In turn, the performance of the selected companies belonging to different sectors in BSE-SENSEX was analyzed using EVA. The volatile nature of the capital markets characterized by various speculative activities have a greater influence on share prices, eventually undermining the impact of performance metrics on them. Thus, the findings of the study enumerates that EVA does not have a considerable explanatory power on share prices.

Virtual water flows and trade liberalization

2004 ◽  
Vol 49 (7) ◽  
pp. 25-32 ◽  
Author(s):  
J. Ramirez-Vallejo ◽  
P. Rogers
Keyword(s):  
Water Resources ◽  
Trade Liberalization ◽  
Formal Model ◽  
Explanatory Power ◽  
Value Added ◽  
Virtual Water ◽  
Agricultural Trade ◽  
Virtual Water Trade ◽  
Water Flows ◽  
The Impact

The linkages between agricultural trade and water resources need to be identified and analyzed to better understand the potential impacts that a full liberalization, or lack thereof, will have on water resources. This paper examines trade of virtual water embodied in agricultural products for most countries of the world. The main purpose of the paper, however, is to examine the impact of trade liberalization on virtual-water trade in the future. Based on a simulation of global agricultural trade, a scenario of full liberalization of agriculture was used to assess the net effect of virtual water flows from the relocation of meat and cereals’ trade. The paper also identifies the main reasons behind the changes in the magnitude and direction of the net virtual water trade over time, and shows that virtual water trade flows are independent of water resource endowments, contrary to what the Heckscher-Ohlin Theorem states. Finally, based on a formal model, some input demand functions at the country level are estimated. The estimates of the income and agricultural support elasticities of demand for import of virtual water have the expected sign, and are statistically significant. Variables found to have some explanatory power of the variance of virtual water imports are average income; population; agriculture as value added; irrigated area, and exports of goods and services.

scholarly journals Effect of Independent Commissioners and Characteristics of Audit Committee on Profit Quality with Earning Management as Intervening Variables

2020 ◽  
Vol 03 (12) ◽  
Author(s):  
Theresia Trisanti ◽  
Keyword(s):  
Earnings Management ◽  
Audit Committee ◽  
Stock Exchange ◽  
Earnings Quality ◽  
Manufacturing Companies ◽  
Accrual Quality ◽  
Negative Effect ◽  
The Impact ◽  
Intervening Variables ◽  
Positive Effect

This research objectives is determine whether the audit committee's expertise and the numbers of independent commissioners affect the quality of earnings through earnings management as an intervening variable. Earnings management model using the Modified Jones and earnings quality variables use accrual quality indicators. The study’s population are manufacturing companies listed on the Indonesia Stock Exchange from 2014-2018. The sample of this study selected using purposive sampling method. The results of this study indicate that audit committee expertise has an insignificant negative effect on earnings management and earnings quality, the number of independent commissioners has a significant negative effect on earnings management and has a positive effect on earnings quality. While earnings management has an insignificant positive effect on earnings quality. Therefore, earnings management does not mediate the impact between audit committee expertise and number of independent commissioners on earnings quality as intervening variables.

scholarly journals The Impacts of IFRS Adoption on Financial Statement Quality for Firms Listed in Indonesia Stock Exchange

2014 ◽  
Vol 2 (4) ◽  
pp. 95-105
Author(s):  
Inten Rachmawati Abuda ◽  
Felizia Arni Rudiawarni
Keyword(s):  
Earnings Management ◽  
Value Relevance ◽  
Emerging Market ◽  
Explanatory Power ◽  
Share Price ◽  
Financial Statement ◽  
Earnings Volatility ◽  
Ifrs Adoption ◽  
Significant Difference ◽  
The Impact

Objective - the objective of this research is to explain whether the adoption of IFRS in Indonesia has improved accounting information quality. Methodology/Technique - Earnings volatility and discretionary accruals are used to test the scope of earnings management on a set of accounting standard used. The regression of share price and book value per share and net profit per share, along with the explanatory power of the model were used to test the value relevance of the accounting standards applied. Findings - This research finds that no significant difference of earnings management's scope after the mandatory adoption of the IFRS. Moreover, this research also finds that IFRS does not result in higher value relevance. Novelty - This research presents evidence of IFRS convergence from an emerging market point of view, particularly in Indonesia. The focus of this research is to examine the impact of IFRS adoption of financial statement quality using multiple measurements. Type of Paper - Empirical Keywords: Financial statement quality; International Financial Reporting Standard (IFRS); Earnings management; Earnings volatility; Value relevance.

scholarly journals Potential usage of Beneish's M-score under the conditions of selected segment of Slovak Economy

2021 ◽  
Vol 129 ◽  
pp. 03015
Author(s):  
Boris Kollar
Keyword(s):  
Earnings Management ◽  
Everyday Life ◽  
Statistical Methods ◽  
Financial Analysis ◽  
Value Added ◽  
Institutional Research ◽  
Comparison Analysis ◽  
Comprehensive Overview ◽  
Creative Accounting ◽  
The Impact

Research background: The motivation behind submitted article is the institutional research of earnings management. The aim is to identify the differences between the usage of creative accounting techniques in the form of Beneish’s M-score under the conditions of Slovak economy. The paper focuses on these differences and specifics and possible reasons behind them. Paper highlights also the impact of globalization on companies and therefore also behind their motives to use earnings management. It also offers several definitions of earnings management and also highlights the importance of the borderline knowledge between earnings management and fraudulent behavior. The Beneish’s model seems to be used by several of major Slovak companies in food segment. The aim was to analyse this sector of Slovak economy, because of its importance to everyday life of people. To assess the motivation behind its usage by these companies. Either it is because they want to transfer their earnings to maternal companies, or there are unexpected local circumstances. Purpose of the article: To describe specifics in the process of Beneish’s model usage under the conditions of selected segment of Slovak economy and also to highlight motivation behind its usage. Methods: The paper is built on the statistical methods, financial analysis as well as the methods of formal logic, like comparison, analysis or synthesis and deduction. Findings & Value added: Comprehensive overview of the earnings management definition, its forms and motives behind its usage and foremost specifics in its usage under the conditions of selected segments of Slovak economy.

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