Gross profit manipulation in emerging economies: evidence from India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Manish Bansal ◽  
Ashish Kumar ◽  
Vivek Kumar
Keyword(s):  
Relative Advantage ◽  
Gross Margin ◽  
Content Type ◽  
Panel Data Regression ◽  
Data Regression ◽  
Study Results ◽  
Uniform Sample ◽  
Expectation Model ◽  
Peer Performance ◽  
Profit Manipulation

Purpose This study aims to explore peer performance as the motivation behind gross profit manipulation through two different channels, namely, cost of goods sold (COGS) misclassification and revenue misclassification. Design/methodology/approach Gross profit expectation model (Poonawala and Nagar, 2019) and operating revenue expectation model (Malikov et al., 2018) are used to measure COGS and revenue misclassification, respectively. The panel data regression models are used to analyze the data for this study. Findings The study results show that firms engage in gross profit manipulation to meet the industry’s average gross margin, implying that peer performance is an important benchmark that firms strive to achieve through misclassification strategies. Further results exhibit that firms prefer COGS misclassification over revenue misclassification for manipulating gross profit, implying that firms choose the shifting strategy based on the relative advantage of each shifting tool. Practical implications The findings suggest that firms that just meet or slightly beat industry-average profitability levels are highly likely to engage in classification shifting (CS). Thus, investors and analysts should be careful when evaluating such firms by comparing them with other firms in the same industry. Originality/value First, this study is among earlier attempts to investigate CS motivated by peer performance. Second, this study investigates both tools of gross profit manipulation by taking a uniform sample of firms over the same period and provides compelling evidence that firms prefer one shifting tool over another depending on the relative advantage of each shifting tool.

Influence of firm size and firm age on classification shifting: an empirical study on listed firms in India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Manish Bansal
Keyword(s):  
Earnings Management ◽  
Initial Public Offering ◽  
Performance Metrics ◽  
Relative Advantage ◽  
Content Type ◽  
Income Statement ◽  
Study Results ◽  
Uniform Sample ◽  
Classification Shifting ◽  
Operating Revenue

Purpose Prior studies document that managers engaged in shifting of non-operating revenue to operating revenue (revenue shifting) and shifting of operating expenses to non-operating expenses (expense shifting (ES)) within income statement to report inflated operating profits of firms. This study aims to identify the factors affecting revenue shifting and ES. Design/methodology/approach The operating revenue model (Malikov et al., 2018) and the core earnings expectation model (McVay, 2006) are used for measuring revenue shifting and ES, respectively. The panel data regression models are used to analyze the data for this study. Findings The study results show that large and old firms are engaged in revenue shifting, whereas small and young firms prefer ES over revenue shifting for reporting inflated operating profits. These results imply that firms choose the shifting strategy based on relative advantage and ease in execution. The results are robust after controlling for accruals earnings management, real earnings management and endogeneity bias. Practical implications It suggests investors minutely investigate the operating performance metrics of initial public offering firms that are relatively small and young while buying their shares. Besides, findings suggest accounting standard setters make more mandatory disclosure requirements for recording expense and revenue items in the income statement to curb this corporate misfeasance of classification shifting. Originality/value This is among the earlier attempts to identify firm-specific factors that incentivize firms to prefer one form of shifting over another. Second, the study jointly examines both forms of shifting by taking a uniform sample of firms over the same period. Most of the prior studies have examined one form at a time.

CEO discretion, political connection and real earnings management in Nigeria

2020 ◽  
Vol 43 (8) ◽  
pp. 909-929
Author(s):  
Armaya'u Alhaji Sani ◽  
Rohaida Abdul Latif ◽  
Redhwan Ahmed Al-Dhamari
Keyword(s):  
Earnings Management ◽  
Reporting Quality ◽  
Real Earnings Management ◽  
Political Connection ◽  
Financial Reports ◽  
Content Type ◽  
Dummy Variable ◽  
Panel Data Regression ◽  
Data Regression ◽  
Financial Scandals

Purpose The purpose of this paper is to examine the influence of CEO discretion on the real earnings management and to explore whether the discretion of the CEO to ensure accurate and reliable financial reports is influenced by the political connection of board members. Design/methodology/approach Using the generalized method of movement to control the potential endogeneity on the sample of listed companies in Nigeria, the study conducted several checks using Driscoll–Kraay panel data regression with standard error to robust the main findings. Findings The paper provides evidence that CEO Discretion reduces the tendency of real earnings management and improve the reporting quality. However, the CEO’s discretion to provide reliable financial reports and to reduce the likely earnings manipulation is overturn by the presence of politically connected directors. Originality/value Existing studies on CEO attributes and earnings management in Nigeria fail to explain why CEOs were involved in corporate financial scandals. This paper suggests that the presence of politically connected directors is what override and upturn the CEO discretion to dwell into real earnings manipulations. Prior studies measured political connection using a dummy variable (Chaney et al., 2011; Osazuwa et al., 2016; Tee, 2018), this paper measured political connection using the proportion of politically connected directors. This is on the idea that the presence of more politically connected directors may give them the power to override the CEOs decision.

The effect of internal control on earnings quality in Iran

2017 ◽  
Vol 59 (4) ◽  
pp. 534-546 ◽  
Author(s):  
Mahdi Salehi ◽  
Mostafa Bahrami
Keyword(s):  
Internal Control ◽  
Value Relevance ◽  
Stock Exchange ◽  
Earnings Quality ◽  
Pearson Correlation ◽  
Systematic Sampling ◽  
Content Type ◽  
Listed Firms ◽  
Panel Data Regression ◽  
Data Regression

PurposeThe purpose of the present research is to examine the effect of internal control and risk management on earnings quality of companies listed on the Tehran Stock Exchange (TSE). Design/methodology/approachData were collected from 560 listed firms on TSE, which were selected using systematic sampling. Descriptive statistics, Pearson correlation and panel data regression were used for data analysis during 2009-2014. FindingsThe results showed that earnings management reduces earnings relevance and book value relevance through short-term and long-term discretionary accruals. Originality/valueThe outcomes of the current study are quite interesting to academia and practitioners.

An integrated adoption model for Islamic credit card: PLS-SEM based approach

2018 ◽  
Vol 9 (3) ◽  
pp. 308-335 ◽  
Author(s):  
Dariyoush Jamshidi ◽  
Nazimah Hussin
Keyword(s):  
Conceptual Model ◽  
Credit Card ◽  
Structural Equation ◽  
Resistance To Change ◽  
The Body ◽  
Relative Advantage ◽  
Equation Modeling ◽  
Content Type ◽  
Study Results ◽  
Usage Behavior

PurposeOne challenge when launching new banking services is to overcome resistance to change so as to accelerate market acceptance. This is the case of Islamic credit card (ICC). In response, this study aims to develop a conceptual framework that combines the innovation diffusion theory (IDT) and the theory of reasoned action (TRA) with religious obligation and customer awareness to explain behavior intention and usage behavior of ICC. Design/methodology/approachTo test the conceptual model, the data are collected from 649 bank customers in Malaysia, and the structural equation modeling technique is used to test the forecasting model. FindingsThe study results support some relationships of IDT and TRA, such as relative advantage, compatibility, trialability, observability, attitude and also the customer awareness as a stronger predictor of intention of ICC. Originality/valueTo the author’s knowledge, there have not been any attempt to develop a conceptual model for identifying the factors that influence the adoption of ICC by integrating IDT and TRA and other added measures. Therefore, this study adds to the body of knowledge regarding ICC adoption studies by extending the IDT in this domain and integrating it with TRA as two well-established models in the area of acceptance and usage behavior studies.

Legal source, institutional quality and FDI flows in Africa

2017 ◽  
Vol 59 (5) ◽  
pp. 687-698 ◽  
Author(s):  
Godfred A. Bokpin ◽  
Lord Mensah ◽  
Michael E. Asamoah
Keyword(s):  
Panel Data ◽  
South African ◽  
Legal System ◽  
Generalized Method Of Moments ◽  
Institutional Quality ◽  
Policy Implications ◽  
African Countries ◽  
Content Type ◽  
Panel Data Regression ◽  
Data Regression

Purpose This paper aims to find out how the legal system interacts with other institutions in attracting Foreign Direct Investment (FDI) into Africa. Design/methodology/approach The authors use annual panel data of 49 African countries over the period 1980 to 2011, and use the system generalized method of moments (GMM) estimation technique and pooled panel data regression. Findings The authors find that the source of a country’s legal system deters FDI inflow as institutions alone cannot bring in the needed quantum of FDI. In terms of trading blocs, it was found that there is negative significant relationship between institutional quality and FDI for South African Development Community (SADC) as well as Economic Community of West Africa States (ECOWAS) countries. Practical implications For policy implications, the results suggest that reliance on institutions alone cannot project the continent to attract the needed FDI. Originality/value Empiricists have devoted considerable effort to estimating the relationship between institutions and FDI on the African continent, but this paper seeks to ascertain the effect of legal systems and institutional quality within African specific trade and regional blocks.

Applying grey system theory to evaluate the relationship between industrial characteristics and innovation capabilities within Chinese high-tech industries

2016 ◽  
Vol 6 (2) ◽  
pp. 143-168 ◽  
Author(s):  
Wuwei Li
Keyword(s):  
System Theory ◽  
Grey System Theory ◽  
High Tech ◽  
Grey System ◽  
Content Type ◽  
Relational Analysis ◽  
Panel Data Regression ◽  
Data Regression ◽  
Grey Relational ◽  
The Relationship

Purpose – For the studies whose purposes are to evaluate the relationship between industrial characteristics and innovation activities of the enterprises, there are some limitations in the measures of industrial characteristics and using traditional statistical techniques. The purpose of this paper is to investigate the relationship between industrial characteristics and innovation capabilities within Chinese high-tech industries using grey system theory. The research results show that grey system theory is suitable to investigate the relationship between industrial characteristics and innovation capabilities within Chinese high-tech industries. Design/methodology/approach – This paper proposes the measures of industrial characteristics and innovation capabilities of high-tech enterprises. First, based on the data on Chinese large and medium-sized high-tech enterprises for the period of 2011-2013, this paper applies grey relational analysis to identify the relatively most important indexes on affecting innovation capabilities of Chinese high-tech enterprises. Second, based on the results from grey relational analysis, this study draws a ranking of the five Chinese high-tech industries in terms of innovation capabilities by grey decision making. Finally, based on the results from grey decision making, this study applies GM (0, N) model to investigate the relationship between industrial characteristics and innovation capabilities within Chinese high-tech industries. Findings – The results of this study show that in the evaluation indexes system of innovation capabilities of high-tech enterprises, personnel in R & D institutions, R & D personnel, internal expenditure on R & D, expenditure on new product development, expenditure on technology imports, expenditure on technology renovation, and expenditure on technology assimilation and absorption are relatively most important elements affecting innovation capabilities of Chinese high-tech enterprises. In addition, the two top ranking on innovation capabilities are manufacture of electronic equipment and communication equipment, and manufacture of medicines. At last, the findings indicate that in the measures of industrial characteristics, the three top ranking on affecting innovation capabilities of Chinese high-tech enterprises are R & D intensity, technology absorption intensity of indigenous high-tech enterprises and foreign-invested enterprises size. The opening level is in the middle position. Technology intensity, market concentration, and state-owned enterprises size are the three bottom ranking on affecting innovation capabilities of Chinese high-tech enterprises. Research limitations/implications – This study has some limitations. First, this study is limited to Chinese high-tech industries. The findings may not be applicable to other countries’ high-tech industries. Further studies with other countries’ high-tech industries could be extended and examined how industrial characteristics affect innovation capabilities of the firms in these industries. Second, the measures of industrial characteristics proposed in this study are somewhat theoretically weak. In the future, the authors will further improve the current analysis, and develop the measures of industrial characteristics. Finally, with the advent of the more data with the consistent statistical coverage released by China’s National Bureau of Statistics during the more continuous years, other methods, such as panel data regression model in econometrics could be used to evaluate the relationship between industrial characteristics and innovation capabilities within Chinese high-tech industries. By then, the scholars can compare the results from grey system theory and those from panel data regression model in econometrics. Practical implications – Appropriate industrial environment is favorable for Chinese high-tech enterprises to feed their innovation capabilities. Scientific evaluation on the relationship between industrial characteristics and innovation capabilities within Chinese high-tech industries is of great significance for Chinese high-tech enterprises in exerting technological catch-up and promoting their competitive advantage. The purposed measures of industrial characteristics and innovation capabilities of high-tech enterprises in this paper, and combined methodology based on grey system theory could be applied to evaluate the relationship between industrial characteristics and innovation capabilities of Chinese high-tech enterprises. Originality/value – This paper proposes the measures of industrial characteristics and innovation capabilities of high-tech enterprises, and uses grey system theory to evaluate the relationship between industrial characteristics and innovation capabilities within Chinese high-tech industries.

scholarly journals Effects of financial development on income inequality in East Java Province

2020 ◽  
Vol 8 (5) ◽  
pp. 447-454
Author(s):  
Munawaroh Desty Anggraeni ◽  
Ris Yuwono Yudo Nugroho
Keyword(s):  
Time Series ◽  
Income Inequality ◽  
Financial Development ◽  
Cross Sections ◽  
Quantitative Methods ◽  
Analysis Method ◽  
Panel Data Regression ◽  
Data Regression ◽  
Regional Budget ◽  
Study Results

The research purposes are: (1) to determine the effect of financial sector development on income inequality in East Java Province, (2) to determine the effect of regional characteristics on income inequality in East Java Province. The study uses descriptive quantitative methods. The analysis method uses panel data regression with time series from 2013 to 2017 and cross-sections of 38 districts in East Java Province. The study results are as follows: (1) financial development has a negative and significant effect on income inequality, (2) the regional budget has a positive and significant effect on income inequality in East Java Province, (3) population density has a positive and significant effect on income inequality, (4) poverty has a positive and significant effect on income inequality, and (5) unemployment has no influence and is not significant in income inequality.

Open innovation: an analysis of twelve years of research

2016 ◽  
Vol 9 (1) ◽  
pp. 22-37 ◽  
Author(s):  
Mokter Hossain ◽  
Muhammad Anees-ur-Rehman
Keyword(s):  
Open Innovation ◽  
Future Research ◽  
Firm Level ◽  
Content Type ◽  
Analytical Technique ◽  
Quantitative Studies ◽  
Panel Data Regression ◽  
Data Regression ◽  
Future Research Directions ◽  
Data Source

Purpose – The purpose of this paper is to explore patterns and developments in the open innovation literature. Design/methodology/approach – A bibliometric analysis was performed by classifying 411 articles in a range of key attributes. Findings – Europe (61 per cent) as a region of data source was higher than all other regions together. As a unit of analysis, firm level (65 per cent) was more than all other levels together. Qualitative studies were mostly case-based, and quantitative studies were largely based on survey and panel data. Regression was a widely used analytical technique. Originality/value – The authors identified avenues to address overlooked research topics, increase cross-continental collaboration, diversity of research methods beyond case study and survey, etc. Based on findings, the authors outlined some future research directions.

Are restaurant customers ready for tablet-based menus?

2019 ◽  
Vol 31 (7) ◽  
pp. 2914-2932 ◽  
Author(s):  
Nataly Suarez ◽  
Katerina Berezina ◽  
Wan Yang ◽  
Susan Gordon
Keyword(s):  
Individual Differences ◽  
Perceived Risk ◽  
New Technologies ◽  
Relative Advantage ◽  
Content Type ◽  
Study Results ◽  
Innovation Characteristics ◽  
Quick Service ◽  
The Impact ◽  
Technology Anxiety

Purpose The purpose of this study is to explain the impact of innovation characteristics (relative advantage, compatibility, complexity and perceived risk) and individual differences (inertia, technology anxiety, need for interaction and previous experience) on customer intentions to adopt tablet-based menus in various restaurants settings. Design/methodology/approach An experimental design was used in this study to explore tablet-based menu acceptance intentions across three restaurant settings: quick-service, midscale and upscale. A total of 415 participants were randomly assigned to one of the three scenarios describing a dining experience. Each scenario placed participants in a restaurant setting where a tablet-based menu was a part of the guests’ dining experience. Findings The study results indicated that out of the four innovation characteristics, compatibility and relative advantage are strong predictors of adoption intention of tablet-based menus. Among customer individual differences, technology anxiety and need for interaction were not found to have a statistically significant impact on intentions to adopt tablet-based menus. It was also found that customers dining at quick-service and midscale restaurants are more likely to adopt tablet-based menus than customers dining at upscale restaurants. Practical implications Managers in quick-service and midscale restaurants may consider investing in tablet-based menus, as customers of these restaurant types demonstrate higher adoption intentions compared to the customers of upscale dining establishments. The results of this study suggest that upscale restaurants should plan carefully before switching to table-based menus. Originality/value The findings of this study may assist restaurant managers in recognizing the importance of customer acceptance of new technologies such as tablet-based menus, which will lead to informed decisions about implementing tablet-based menus in their establishments.

Interorganizational cooperation and process innovation

2019 ◽  
Vol 31 (2) ◽  
pp. 260-283
Author(s):  
Rafael Morais Pereira ◽  
Felipe Mendes Borini ◽  
Moacir de Miranda Oliveira Jr
Keyword(s):  
Developed Countries ◽  
Process Innovation ◽  
Content Type ◽  
Interorganizational Cooperation ◽  
Panel Data Regression ◽  
Foreign Countries ◽  
Data Regression ◽  
Micro Level ◽  
Business Sectors ◽  
Practical Implications

Purpose In this paper, the authors investigate whether the location of interorganizational partners affects the outcomes of process innovation. Herein, the term partner location refers to multiple degrees of proximity or distance, including in the same national province or state, in other national provinces or states, in the same country and in foreign countries. The purpose of this paper is to show that partner location, whether domestic or foreign, depends on which partner an organization needs in order to advance its process innovation. Design/methodology/approach To test the hypotheses, the authors employed a panel data regression model to analyze data from 28 Brazilian business sectors from 2003 to 2014, all collected for PINTEC: The Brazilian Survey of Technological Innovation, representing a total of 107,854 companies. Findings The results show that cooperation is significant with both national and foreign partners, even though they bear different effects on the various degrees of innovativeness related to process innovation. Practical implications For managerial practice, the results corroborate that the choice of partners has to be strategic and take their location into account. In particular, practices at the domestic level with suppliers and vocational training centers are relevant to increasing innovation at the micro level. At the same time, for higher levels of innovation, managers should prioritize, within the limitations of existing resources, cooperation with universities, competitors and suppliers from abroad, especially in developed countries. Originality/value The main academic contribution of the study is the highlighting partner location (i.e. proximate or distant) as relevant to results of process innovation. Nevertheless, the authors determined that this process is heterogeneous, given the function of each partner and taking the different degrees of innovativeness into account.

Sign in / Sign up

Export Citation Format

Share Document