Earnings management and voluntary disclosure of management's responsibility for the financial reports
Purpose – The purpose of this paper is to investigate the relationship between voluntary disclosure of a statement of management's responsibility for the financial reports (MRF) and earnings management, both accrual and real earnings management, in firms listed on the Stock Exchange of Thailand (SET). Design/methodology/approach – The samples in this study are selected from listed companies on the SET in the year 2009. The multiple regression are used to test hypotheses. Findings – The results show that the inclusion of a MRF has no association with both discretionary accrual and real earnings management activities (i.e. sales manipulation, a decrease in discretionary expenditures, and overproduction). The findings from the study reveal that firms with or without the MRF manipulate their earnings in a similar manner. Research limitations/implications – The sample for the study includes Thai listed firms in the year 2009 only. The small sample size may limit the validity of generalizations from these conclusions. Practical implications – Based on the results, the regulators will know that the voluntary disclosure of management responsibilities on the financial reports is an ineffective tool to control earnings management. Social implications – Like Sarbanes-Oxley Act 2002, a disclosure of management responsibilities on the financial reports should be required by the Securities and Exchange Commission of Thailand. Originality/value – Investors will know that firms with or without the MRF manipulate their earnings in a similar manner. The voluntary disclosure of an MRF in Thailand does not guarantee earnings quality.