Financial Crisis and Earnings Management Under U.S. GAAP and IFRS

2020 ◽  
Vol 23 (02) ◽  
pp. 2050015
Author(s):  
Thanyaluk Vichitsarawong ◽  
Li Li Eng
Keyword(s):  
Financial Crisis ◽  
Earnings Management ◽  
Financial Reporting ◽  
Global Financial Crisis ◽  
Discretionary Accruals ◽  
The United States ◽  
Production Costs ◽  
Real Earnings Management ◽  
Foreign Companies ◽  
The Global Financial Crisis

This paper examines the effects of the global financial crisis of 2008 on real and accrual-based earnings management activities of foreign companies listed in the United States as American Depositary Receipts (ADRs). The ADR firms are classified according to whether they report under U.S. Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). Accrual-based earnings management is measured using the absolute value of performance-matched discretionary accruals. We also use the positive and negative values of performance-matched discretionary accruals to examine income-increasing and income-decreasing earnings management, respectively. Real earnings management proxies are measured using performance-matched measures of the abnormal levels of cash flow from operations, production costs, and discretionary expenses. In summary, our findings indicate no difference in accrual-based earnings management for ADRs reporting under IFRS and U.S. GAAP but suggest that ADRs reporting under IFRS are more likely to manage earnings using income-decreasing discretionary accruals and aggregate real earnings management than ADRs reporting under U.S. GAAP during the financial crisis.

Earnings Management and Financial Crisis: Evidence from India

2017 ◽  
Vol 18 (2) ◽  
pp. 84-101 ◽  
Author(s):  
Manish Kumar ◽  
Madhu Vij
Keyword(s):  
Financial Crisis ◽  
Earnings Management ◽  
Global Financial Crisis ◽  
Discretionary Accruals ◽  
Financial Data ◽  
Management Behavior ◽  
Crisis Period ◽  
Before And After ◽  
The Global Financial Crisis ◽  
High Level

This paper attempts to examine the earnings management behavior of Indian firms during the global financial crisis in 2008 and compare with the period before and after. It uses the financial data of S&P CNX 500 companies for the period of 2007-2012. GICS, the best industry classification system among competing alternatives, has been used for computing discretionary accruals (DA). The study finds a high level of earnings management in firms during the pre-crisis period, a significant decrease during the crisis period, and an increase again in the post-crisis period. The study further examines the earnings management behavior isolating the firms into two categories – firms with positive DA and firms with negative DA. We found that earnings management in both these categories of firms decreased during the crisis period and increased in the post-crisis period for firms with negative DA. However, for firms with positive DA, our results are inconclusive.

scholarly journals The credibility of earnings announced by new stock companies: accrual and real earnings management

Equilibrium ◽  
2021 ◽  
Vol 16 (3) ◽  
pp. 661-677
Author(s):  
Tomasz Sosnowski
Keyword(s):  
Earnings Management ◽  
Initial Public Offering ◽  
Financial Reporting ◽  
Value Added ◽  
Financial Statements ◽  
Discretionary Accruals ◽  
Cash Flows ◽  
Production Costs ◽  
Real Earnings Management ◽  
The Impact

Research background: An initial public offering (IPO) creates an excellent opportunity to research the impact of changes in the institutional environment of companies on the trustworthiness of the information disclosed in financial statements. Purpose of the article: The main aim of the study is to analyze the use of accrual and real earnings management to inflate earnings, revenue, or total assets around the going public event. Therefore, this paper contributes to the stream of study on the quality of financial reporting of new stock companies. Methods: Two main approaches reflect the use of various types of earnings management activities, i.e., discretionary accruals and real earnings management. In both cases, it was necessary to use proper OLS method estimated models to identify the normal level of categories that affect the results reported in financial statements. Findings & value added: Based on a sample of 183 IPOs from the Warsaw Stock Exchange between 2005 and 2015, generally, managers of newly-listed companies actively use discretionary accruals, reduce production costs and certain discretionary expenses, and abnormal cash flows from operations ? i.e., all proxies of earnings management used in the paper ? in the periods around the IPO. In the period prior to the IPO, managers more often introduce techniques typical of the real sphere of the company's operations, in particular, the deliberate modeling of certain discretionary costs. In turn, the use of discretionary accruals dominates in the year after the IPO.

A Global Perspective on Securitized Debt

2018 ◽  
Author(s):  
Steven L Schwarcz
Keyword(s):  
United States ◽  
Financial Crisis ◽  
Capital Market ◽  
Global Financial Crisis ◽  
The United States ◽  
Global Perspective ◽  
Capital Markets Union ◽  
The Global Financial Crisis ◽  
Asset Backed Securities ◽  
The Eu

Securitisation represents a significant worldwide source of capital market financing. European investors commonly invest in asset-backed securities issued in U.S. securitisation transactions, and vice versa One of the key goals of the European Commission's proposed Capital Markets Union (CMU) is to further facilitate securitisation as a source of capital market financing as a viable alternative to bank-based finance for companies operating in the EU. To that end, this chapter explains securitisation and attempts to put its rise, its decline after the global financial crisis, and its recent CMU-inspired revival into a global perspective. It examines not only securitisation's relationship to the financial crisis but also post-crisis comparative regulatory approaches in the EU and the United States.

scholarly journals Determinants of failure in Greek manufacturing SMEs

2017 ◽  
Vol 14 (3) ◽  
pp. 45-55 ◽  
Author(s):  
Efthalia Tabouratzi ◽  
Christos Lemonakis ◽  
Alexandros Garefalakis
Keyword(s):  
Financial Crisis ◽  
Financial Reporting ◽  
Fixed Effects ◽  
Global Financial Crisis ◽  
Manufacturing Sector ◽  
Bank Lending ◽  
Policy Implications ◽  
Z Score ◽  
The Government ◽  
The Global Financial Crisis

The globalization and the global financial crisis provide a new extremely competitive environment for small and medium sized enterprises (SMEs). During the latest years, the increased number of firms’ default has generated the need of understanding the factors of firms’ default, as SMEs in periods of financial crisis suffer from lack of financial resources and expensive bank lending. We use a sample of 3600 Greek manufacturing firms (9 Sectors), covering the time period of 2003-2011 (9 years). We run a panel regression model with correction for fixed effects in both the cross-section and period dimensions using as dependent variable the calculated Z-Score of each firm, and as independent variables several financial ratios, as well as the exporting activity and the use of International Financial Reporting Standards (IFRS Accounting Standards).We find that firms presenting higher performance in terms of ROA and sales and higher leverage levels that enhance their liquidity as well are healthier in terms of Z-score than their less profitable counterparts and acquire lower rates of probability of default: in other words, less risk. The results of the study can lead to policy implications for both Managers and the Government in order to enhance the growth of Greek manufacturing sector.

“A Change in the Balance of Power”

2021 ◽  
pp. 159-182
Author(s):  
Rush Doshi
Keyword(s):  
United States ◽  
Financial Crisis ◽  
Global Financial Crisis ◽  
Balance Of Power ◽  
The United States ◽  
Grand Strategy ◽  
Chinese Leader ◽  
Regional Order ◽  
Balance Of Forces ◽  
The Global Financial Crisis

Chapter 7 explores the dawn of China’s grand strategy to build regional order as well as the ends, ways, and means of this strategy. Using Party texts, it explores how the shock of the Global Financial Crisis led China to see the United States as weakening and emboldened it to take a more assertive course. It begins with a thorough review of China’s discourse on “multipolarity” and the “international balance of forces,” concepts China uses as euphemisms for US power and which it ties to its strategic guidelines. It then shows that the Party sought to lay the foundations for order—coercion, inducements, and legitimacy—under the auspices of the revised guidance “actively accomplish something” issued by Chinese leader Hu Jintao in 2009. This strategy, like blunting before it, was implemented across multiple instruments of statecraft—military, political, and economic.

How does real earnings management respond to the 2007-2008 financial crisis?

2020 ◽  
Vol 32 (4) ◽  
pp. 495-517
Author(s):  
Zhigang Li ◽  
Yuan-Teng Hsu ◽  
Xiang Gao
Keyword(s):  
Financial Crisis ◽  
Earnings Management ◽  
Global Financial Crisis ◽  
Probit Model ◽  
Real Earnings Management ◽  
Share Repurchases ◽  
2008 Financial Crisis ◽  
Event Window ◽  
Content Type ◽  
Dummy Variable

Purpose This paper aims to investigate the dynamics of repurchase-based earnings management vis-à-vis other real activities manipulations during the 2007–2008 financial crisis. Design/methodology/approach This paper adopts a Probit model to regress alternate real earnings management (REM) methods on a dummy variable indicating whether a firm falls in the crisis event window or not, during our 15-year sample period. This paper also detects switches made by suspected firms from repurchasing to other REM tools such as reducing discretionary expenditures. Findings This paper provides solid evidence indicating that firms suspected of earnings management have the tendency to decrease accretive share repurchases after the onset of the crisis. Conversely, the above pattern is neither observed in non-suspect firms nor over non-crisis periods. A further investigation documents that firms that switch REM during crisis can be characterized by less cash holding, smaller size, more severe liquidity shortage and/or tighter financial constraint. Originality/value This paper contributes to the literature on understanding the respective and interactive implications of both share repurchases and global financial crisis on firms’ REM activities.

scholarly journals The Arab world amidst the global financial crisis of 2008–2009

2010 ◽  
Vol 3 (1) ◽  
pp. 38-52
Author(s):  
Shalendra D. Sharma
Keyword(s):  
Financial Crisis ◽  
Financial Markets ◽  
Global Financial Crisis ◽  
Arab World ◽  
The United States ◽  
Arab Countries ◽  
Financial Contagion ◽  
Poor Countries ◽  
Resource Poor ◽  
The Global Financial Crisis

When the problems in the United States housing sector mushroomed into a global financial crisis by September 2008, it was assumed that Arab countries would remain immune: the oil-rich Gulf Cooperation Council (GCC) countries because of their massive financial reserves, and the resource-poor countries because of their limited linkages to the global economic system – in particular, the global financial markets. However, this assumption has proven to be false. The US subprime mortgage collapse not only pushed the advanced economies into recession, but also it shattered global economic confidence, resulting in a massive financial contagion around the world. What explains the Arab World's vulnerability to the crisis? How has the crisis impacted both the resource rich and the resource poor? How have Arab countries responded to the crisis, and what must they do to insulate their economies better from the vagaries of global financial markets? This paper addresses these questions.

15 Litigation and Enforcement involving Private Funds after the Global Financial Crisis

2018 ◽  
Author(s):  
Spangler Timothy
Keyword(s):  
Financial Crisis ◽  
Hedge Funds ◽  
Global Financial Crisis ◽  
Private Investment ◽  
The United States ◽  
Regulatory Regime ◽  
Investment Funds ◽  
The Subject ◽  
The Global Financial Crisis ◽  
The Uk

This chapter focuses on the increase in the amount of litigation and enforcement actions against private investment funds in the United States, the UK, and across the globe as a result of the global financial crisis. As more disputes arose during the course of the global financial crisis, the legal and regulatory regime impacting private investment funds has been the subject of closer scrutiny than has been seen in previous decades. The chapter first considers the Securities and Exchange Commission’s (SEC) enforcement actions against hedge funds as well as U.S. civil litigation prior to the financial crisis before discussing Dodd-Frank and its effect on enforcement. It then examines the SEC’s enforcement actions regarding broker-dealer registration, along with some of its key enforcement actions after Dodd-Frank. It also analyses the Financial Conduct Authority’s enforcement priorities after the global financial crisis and key litigation in the UK involving private investment funds.

Fiscal and Monetary Policies in Reaction to the Financial Tsunami by the Taiwanese Government

2011 ◽  
Vol 14 (01) ◽  
pp. 153-169 ◽  
Author(s):  
Hsiao-Yin Chen ◽  
Cheng-Few Lee ◽  
Tzu Tai ◽  
Kehluh Wang
Keyword(s):  
Financial Crisis ◽  
Financial Market ◽  
Global Financial Crisis ◽  
The United States ◽  
Insurance Companies ◽  
Monetary Policies ◽  
Policy Measures ◽  
The Global Financial Crisis ◽  
The Impact ◽  
Taiwanese Government

The main purpose of this paper is to investigate the impact of the 2007 financial tsunami on the Taiwanese financial market. We find that, although significant for banks, security firms, and insurance companies, the effect was relatively lower if compared with that in Europe and the United States. In addition, we present fiscal and monetary policies issued by the Taiwanese government in reaction to the global financial crisis. These policy measures focused on stabilizing the financial market, reducing the level of unemployment, and creating more lending opportunities in support of Taiwanese companies. We also discuss the policy measures of the US government and other Asian countries in relation to the global financial crisis. Finally, we provide some suggestions to improve financial supervision and enhance financial reforms in Taiwan.

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