scholarly journals Historical Development of Earnings Management Models

2021 ◽  
Vol 92 ◽  
pp. 02058
Author(s):  
Anna Siekelova
Keyword(s):  
Earnings Management ◽  
Historical Development ◽  
Management Practices ◽  
Current Issue ◽  
Value Added ◽  
Added Value ◽  
Management Issue ◽  
Management Models ◽  
The Usa ◽  
The 1960S

Research background: Contribution responds to the current issue of Earnings Management (hereafter „EM“) initiatives. Authors have been dealing with EM initiatives since at least the 1960s. Initial studies came from the USA. Due to the globalization, awareness of EM techniques and models created abroad is also reaching European countries. Especially after the recent economic fluctuations (financial crisis in 2009; COVID-19 in 2020), the application of EM principles in companies with an effort to achieve a balanced profit can be assumed. The issue of earnings management has begun to be associated with the issue of its measurement. The problem is a large number of models, so choosing one is not easy. Although earnings management issue has been investigated under various hypotheses, there is no agreement on a uniform detection or measurement of earnings management practices. A number of earnings management models can be found in studies. Many of them were created recently, others are older. Most originated abroad. Purpose of the article: The aim of the paper is to clarify the historical development of earnings management models. Methods: Bibliometric analysis for historical development of EM models. Findings & Value added: The added value of the contribution is in the clarification of the historical development of the EM model as well as clarify the development of profit models.

scholarly journals Explanatory Power of Earnings Management Models

2021 ◽  
Vol 92 ◽  
pp. 02041
Author(s):  
Zdenko Metzker ◽  
Anna Siekelova
Keyword(s):  
Earnings Management ◽  
Management Practices ◽  
Slovak Republic ◽  
Explanatory Power ◽  
Value Added ◽  
Nonparametric Test ◽  
Added Value ◽  
Economic Conditions ◽  
Significance Level ◽  
Management Models

Research background: Authors deal with the current issue of Earnings Management (hereafter „EM“). It can be said that the emphasis on this issue is constantly growing, especially abroad. Under the condition of Slovak economy, earnings management practices are considered to be a currently developing issue. Based on the globalization, EM practices, models and techniques created abroad are also reaching European countries. Mainly after the recent economic fluctuations caused by financial crisis or COVID-19, the application of earnings management principles in companies with an effort to achieve a balanced profit can be assumed. Within studies or researches, there are many earnings management models. Most of them were created abroad. It means in different economic conditions. There is therefore a question of their use in the conditions of the Slovak economy. Particular importance is their explanatory power, which they achieve in different economic conditions than those in which they arose. Purpose of the article: The aim of the paper is to test the explanatory power of selected foreign models in the Slovak Republic. Methods: Statistical methods used in selected EM models (regression, Mann-Whitney nonparametric test); adjusted R square predicted sign of a variable, standard deviation significance level of model to verify the explanatory power of selected models. Findings & Value added: The added value of the contribution is in the testing of the explanatory power of selected foreign models in other economic conditions in which they were created.

scholarly journals A comparison of ethical perceptions of earnings-management practices

2011 ◽  
Vol 14 (4) ◽  
pp. 422-435 ◽  
Author(s):  
Leonie Jooste
Keyword(s):  
Earnings Management ◽  
Management Practices ◽  
Earnings Quality ◽  
Harvard Business Review ◽  
Business Managers ◽  
Short Term ◽  
Nelson Mandela ◽  
Sarbanes Oxley ◽  
The Usa ◽  
Accounting Practitioners

In 1990, Bruns and Merchant (1990) surveyed earnings-management practices and asked the readership of the Harvard Business Review to rate the acceptability of those practices. Prior to the Bruns and Merchant (1990) study, the morality of short-term earnings-management was of little concern to researchers and accounting practitioners. However, in the light of increased financial frauds and failures, new and increased emphasis has been placed on the importance of the concepts of earnings quality and earnings-management practices.Despite increased research focusing on business ethics since 1990, there is little evidence that the profession is educating accountants about earnings-management practices. This study compares the results of studies on earnings-management practices. Students and business managers were surveyed at the Nelson Mandela Metropolitan University (NMMU) and these results were compared to studies prior to the Sarbanes-Oxley Act 2002 in the USA. The aim of the study is to determine if there have been changes in attitudes towards earnings-management practices since the acceptance of the Sarbanes-Oxley Act.

scholarly journals Audit Committee Characteristics and Earnings Management Practices

2019 ◽  
Vol 22 (1) ◽  
Author(s):  
Melinda Lydia Nelwan ◽  
Billy Ivan Tansuria
Keyword(s):  
Earnings Management ◽  
Audit Committee ◽  
Management Practices ◽  
The Other ◽  
Manufacturing Companies ◽  
Management Models ◽  
Other Hand ◽  
Financial Expertise ◽  
Jones Model

This study revisits the effectiveness of the audit committee independence and expertise in preventing earnings management practices.  Studies in other countries that have relatively stricter regulations showed the audit committee independence was effective to prevent earnings management.  Arguably, the practice may be different in Indonesia whose regulation is considerably more lenient.  On the other hand, studies related to audit committee expertise is rarely done in Indonesia.  This study utilized two of the earnings management models namely the Modified Jones Model and the Performance-Adjusted Modified Jones Model.  This study was limited to Indonesian listed manufacturing companies from 2009 to 2011.  Consistent for both earnings management models, the results show that audit committee independence is effective to prevent earnings management.  However, the results showed that audit committee expertise did not affect earnings management practices.  Although only approximately 39 percent of the audit committee members in Indonesian listed manufacturing companies were independent, the existence of those independence members enabled the audit committee to effectively conduct its monitoring role, especially in preventing earnings management.  Nevertheless, accounting and/or financial expertise might not determine the effectiveness of the audit committee’s monitoring role.

scholarly journals Demystifying Earnings Management Through Accruals Management: An Indian Corporate Study

2012 ◽  
Vol 37 (1) ◽  
pp. 49-56 ◽  
Author(s):  
Sandeep Goel
Keyword(s):  
Earnings Management ◽  
Management Practices ◽  
Value Added ◽  
Discretionary Accruals ◽  
High Price ◽  
Earnings Manipulation ◽  
Net Income ◽  
Bottom Line ◽  
Earnings Growth ◽  
Management Issues

Earnings, the “bottom line” or “net income,” are the single-most important item in financial statements. They indicate the extent of company's value-added activities. They help in resource mobilization in capital markets. On account of the said importance of earnings, the management of the company is always interested in their reporting. This is where management exercises choices for reporting of earnings. The recent Satyam saga or Enron in the past are prime examples of misuse of flexibility in choosing the accounting methods and treatments by the management. Earnings management occurs when management uses discretion in financial reporting and in structuring transactions with the objective of securing private gains. Earnings management issues related to financial disclosure and reporting are increasingly relevant to the multitude of firm stakeholders. In the wake of these manipulative corporate practices, investors and managers are trying to understand whether there is widespread Enron-like manipulation of financial results among corporations or whether these scandals are just an aberration. A related issue for financial analysts, investors, and corporate executives is how to distinguish between earnings manipulation that ultimately proves to be fraudulent and the day-to-day struggles of managers to meet pre-determined targets by using various accounting flexibilities. An understanding of the financial statement effects of financial engineering transactions will thus help managers try to avoid future Satyams and Enrons and help to improve the climate for a common investor. A very important dimension of earnings management is that earnings manipulation is usually not the result of an intentional fraud, but the culmination of a series of aggressive interpretations of the accounting rules and application of aggressive operating activities. The end result is misstatement of the financial results by the people involved and realization by them when it gets too late. The typical case of earnings manipulation begins with a track record of success. The company or division has posted significant sales and earnings growth over recent years. Their stock price trades at high price earnings multiple but unfortunately, it is becoming more difficult for the company to maintain the sales and earnings growth as per the analysts� expectations. The management goes for creative accounting practices to manage their earnings. This study analyses the earnings management practices in corporate enterprises in India by examining the magnitude of discretionary accruals. DeAngelo Model has been used for calculating discretionary accruals in regard to potential earnings management for the study. It also explores earnings management issues with respect to industry classification in these enterprises. The sample was drawn from the top 25 listed profit-making companies for the year 2007. The period chosen for the study was 2002–03 to 2007–08. An examination of the units shows a definite presence of accrual management in the sample companies. Most of the units have been found to be exercising income-increasing discretionary accruals. The earnings creativity is further strengthened by industry parameters among the units.

scholarly journals The Concept Study of Knowledge Value Added in Museum Digital Archives

2020 ◽  
Vol 17 ◽  
Keyword(s):  
Digital Media ◽  
Management Practices ◽  
Value Added ◽  
Added Value ◽  
Digital Collections ◽  
Analog To Digital ◽  
Modern Culture ◽  
Digital Collection ◽  
New Perspective ◽  
Knowledge Value

Museum digital collection should explore its past (object digitization), present (cultural relic interpretation) and future (knowledge value-added and management) practices and benefits. Therefore, it needs a new perspective. Its importance and the preservation and reuse of Museum digital resources are worthy of attention. Looking at the development of museums, when modern culture has rapidly progressed from analog to digital media, from atoms to the world of bits, the role of museums in collecting objects has changed accordingly. The technology of information communication will become more important for the creation, sharing and preservation of Museum cultural resources through the reproduction and reproduction of exhibits. Based on the basic concepts of digital collections, this study aims to provide a clear direction for the development of Museum digital collections by clarifying the concept of knowledge added value

scholarly journals ANALYSIS OF VALUE ADDED DISTRIBUTION AND LEVEL OF TRANSACTION COSTS IN THE RUSSIAN CORPORATIONS

2014 ◽  
Vol 2 ◽  
pp. 83-89 ◽  
Author(s):  
Dmitri Pletnev ◽  
Ekaterina Nikolaeva ◽  
Zinfira Bitkulova
Keyword(s):  
Transaction Costs ◽  
Management Practices ◽  
Profit Maximization ◽  
Value Added ◽  
Metallurgical Industry ◽  
Integrated System ◽  
Added Value ◽  
Business Practices ◽  
New Approach ◽  
Operational Criteria

Modern understanding of the corporation as an integrated system driven by a common goal of profit maximization has brought both economic theory and management practices to a deadlock. Incorrect understanding of the modern corporation’s core, as well as inability to adequately assess them, became one of the causes of the global economic crisis.  One of the promising “reanimation” options of the modern firm theory is the institutional approach. However, this approach is in dire need of measurable operational criteria and indicators that would tie business practices together with their basic theoretical categories: institute, contract, and transaction costs.The scope of this paper is to offer and demonstrate the possibilities of testing methodology for assessing the corporation as an institutional unit of an economic system. To do so, we propose a new approach in the assessment of institutional compliance of the corporations with the expectations of their major subjects.  It is based on estimating the distribution of the gross added value between the subjects.  Moreover, the technique of assessing the level of transaction costs in corporations, based on data accounting, is proposed.  The methods were tested on examples of real Russian metallurgical industry corporations as reported between 2003 and 2012.  The presence of a statistically significant negative connection between the share of value added revenue and level of transaction costs, as well as between the share of value added at the owners disposal and the transaction costs level, was established.  The presence of a statistically significant positive connection between the level of transaction costs and share of value added, at the disposal of workers, was established.

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.

Earnings management and macroeconomic crises

2016 ◽  
Vol 6 (2) ◽  
pp. 179-202 ◽  
Author(s):  
Eduardo Flores ◽  
Elionor Farah Jreige Weffort ◽  
Aldy Fernandes da Silva ◽  
L. Nelson G. Carvalho
Keyword(s):  
Earnings Management ◽  
Management Practices ◽  
Income Taxes ◽  
Return On Assets ◽  
Content Type ◽  
Dummy Variable ◽  
Macroeconomic Factor ◽  
Ratio Size ◽  
The Usa ◽  
Institutional Contexts

Purpose – The purpose of this paper is to investigate whether macroeconomic crises are a motivational factor for earnings management practices by the companies listed in the capital markets of Brazil and the USA. Design/methodology/approach – The sample consisted of 7,932 firm-quarter observations from listed Brazilian companies and 99,931 from listed US companies, covering a 13-year period (1998-2010). The authors developed regression models for the panel data, taking into account discretionary accruals as an earnings management proxy (dependent variable), while crises were regarded as a macroeconomic factor (dummy variable of interest). Also considered were return on assets, market-to-book ratio, size, leverage, foreign direct investment, income taxes, quarters, and sectors, which were treated as control variables. Findings – The results corroborate the conceptual issues involved in undertaking this study, and they demonstrate that in periods of macroeconomic crises, companies are more motivated to employ earnings management practices both in Brazil and in the USA. Originality/value – Unlike previous studies, the model developed in our research includes multiple macroeconomic crises simultaneously. Furthermore, it was applied in two markets at different stages of development and operating in distinct institutional contexts, which indicates its viability for replication for a large number of countries.

scholarly journals Earning management practices in Islamic banking in Indonesia

2020 ◽  
Vol 5 (01) ◽  
pp. 9
Author(s):  
Siti Chanifah ◽  
Hamdani . ◽  
Mutiara Wiedyaningtias
Keyword(s):  
Earnings Management ◽  
Management Practices ◽  
Banking Sector ◽  
Stock Exchange ◽  
Descriptive Analysis ◽  
Value Added ◽  
Discretionary Accruals ◽  
Islamic Banking ◽  
Analysis Technique ◽  
Quantitative Descriptive

This study discusses to study earnings management practices in Islamic banking which are listed on the Indonesia Stock Exchange for the 2012-2016 period. Research using quantitative descriptive. The population in this study is the Islamic banking sector in Indonesia. Research samples at 11 Sharia Commercial Banks (BUS) reported on the Indonesia Stock Exchange. The data analysis technique used is descriptive analysis, with earnings management calculations using the Friedlan Model. The variable analyzed is earnings management using discretionary accruals. The results of this study show how earnings management practices occur in 11 Islamic banks in Indonesia. Value-added positive discretionary accruals indicate that there are earnings management practices by increasing earnings or increasing revenue and negative value discretionary accruals values indicate how earnings management practices by decreasing earnings or income decreases. Keywords: Earnings Management, Discretionary Accruals, Islamic Banking

scholarly journals Analysis of Motives behind the Usage of Earnings Management in Practice under the Conditions of Global Economy

2021 ◽  
Vol 92 ◽  
pp. 02054
Author(s):  
Monika Poradova
Keyword(s):  
Earnings Management ◽  
Global Economy ◽  
Management Practices ◽  
Method Comparison ◽  
Value Added ◽  
Financial Statements ◽  
Global Environment ◽  
Economic Result ◽  
Results Management ◽  
Result Management

Research background: Due to the complexity of the issue of global economic result management, the presented paper focused on specific procedures that are used comprehensively in practice in a global environment. The present paper consists of four parts. The first part of the paper deals with the theoretical aspects of the issue addressed. The second part consists of a combination of themes and a description of the methods that are used globally in the economic environment. The third part includes an analysis of countries that were among the largest manipulators of the global economic result from 2009 to 2018. Subsequently, possible impacts on the financial statements are prepared. The fourth part is devoted to the conclusions of the issue addressed. Purpose of the article: The aim of this paper is to compare the motives that lead to the application of results management practices globally in a global environment. Methods: In the processing of the present paper, a descriptive method, comparison and synthesis were used. Findings & Value added: Accounting standards point out that earnings management can be conducted within the regulatory framework as well as in the conflict of the global environment. The result of the present paper is a comprehensive look at the procedures and issues of earnings management with regard to the functions of the financial statements in the global economy.

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