Managerial Political Spending Choice and Earnings Management

2020 ◽  
Vol 23 (04) ◽  
pp. 2050035
Author(s):  
Shuo Li ◽  
Yu Tony Zhang
Keyword(s):  
Earnings Management ◽  
Empirical Evidence ◽  
Agency Costs ◽  
Political Action ◽  
Political Action Committees ◽  
Management Behavior ◽  
Spending Patterns ◽  
Spending Behavior ◽  
Election Cycles

This study investigates whether and how the CEOs’ political spending choice is associated with their earnings management behavior. Using a sample of 8,502 firm-year observations from S&P 500 firms during 1993–2012 over 10 election cycles, we provide empirical evidence that CEOs making political spending mainly through the corporate channel to recipients advised by the firms’ own political action committees engage in less earnings management than those making political spending mainly through the private channel to their own selected recipients. This finding suggests that CEOs’ political spending choice of the private channel over the corporate channel represents their strong self-interests and is associated with higher agency costs. We further show that the distinction between the two channels is less important when the CEOs’ private political spending patterns are aligned with those of their own firms. Our results are robust to techniques alleviating the potential endogeneity issue related to political spending behavior.

scholarly journals Real Earnings Management and Industry Differences: Based on Empirical Evidence From Listed Companies in China

2020 ◽  
Vol 11 (4) ◽  
pp. 30
Author(s):  
Xuexin Bao
Keyword(s):  
Social Work ◽  
Earnings Management ◽  
Empirical Evidence ◽  
Listed Companies ◽  
Real Earnings Management ◽  
Water Production ◽  
Management Behavior ◽  
The Real ◽  
Chinese Listed Companies

This article examines the industry differences in the real earnings management behavior of listed companies in China. The study finds that listed companies in the health and social work industries have the highest degree of real earnings management, and the electricity, heat, gas and water production and supply industries has the lowest level of real earnings management, and there are obvious industry differences in real earnings management among Chinese listed companies. The empirical evidence in this paper shows that there are industry differences in the real earnings management of Chinese listed companies.

The Effects of Interest Groups' Ideology on Their PAC and Lobbying Expenditures

2010 ◽  
Vol 12 (2) ◽  
pp. 1-21 ◽  
Author(s):  
Amy McKay
Keyword(s):  
Interest Groups ◽  
Political Action ◽  
Political Action Committees ◽  
Unanswered Question ◽  
Group Type ◽  
Congressional Campaigns ◽  
Extreme Groups

While the literature on political action committees' (PACs) contributions to congressional campaigns is substantial, one key variable has been missing: the ideology of the PAC. Such a measure is needed to evaluate a normatively important yet unanswered question: to what extent do PACs give to candidates with whom they agree ideologically, as opposed to candidates they may want to influence after the election? This study shows that many interest groups' preferences for an electoral strategy or an access strategy can be predicted by their left-right ideology and their level of ideological extremism. The analysis finds that more ideologically extreme groups and more liberal groups spend more money on PAC contributions relative to lobbying. Further, groups' underlying left-right ideology is also highly predictive of their allocation of PAC contributions between the two parties—even controlling for group type.

Nonprofit expense management and the zero-profit threshold

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Stephanie Monteiro Miller
Keyword(s):  
Earnings Management ◽  
Design Methodology ◽  
Social Implications ◽  
Profit Motive ◽  
Management Behavior ◽  
Content Type ◽  
Nonprofit Firms

Purpose In a wide variety of settings, individuals target round-numbered thresholds, relaxing effort when they are out of reach. This paper aims to investigate whether this phenomenon occurs in nonprofits as well. Design/methodology/approach The paper empirically examines nonprofits’ propensity to cut expenses relative to the attainability of the zero-profit threshold. Findings This paper finds nonprofit firms are more likely to cut expenses when faced with small expected losses than with larger losses, and this pattern varies predictably with incentives to reach the zero-profit threshold. Research limitations/implications This suggests managers are motivated by desire to reach the zero-profit threshold rather than to improve firms’ economic situations, as the propensity to cut expenses is lower when the threshold is out of reach. Social implications Additionally, the results suggest that even the lack of explicit profit motive may not quell earnings management behavior. Originality/value These results begin to close the gap in our understanding of expense management in nonprofit firms, showing how operating expenses can be used to manage earnings.

Earnings management when firms face mandatory contributions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yiyi Qin ◽  
Jun Cai ◽  
Steven Wei
Keyword(s):  
Earnings Management ◽  
Negative Impact ◽  
Investment Strategy ◽  
Fiscal Year ◽  
Management Behavior ◽  
Indicator Variable ◽  
Stock Market Returns ◽  
Content Type ◽  
Early Results ◽  
Reported Earnings

PurposeIn this paper, we aim to answer two questions. First, whether firms manipulate reported earnings via pension assumptions when facing mandatory contributions. Second, whether firms alter their earnings management behavior when the Financial Accounting Standard Board (FASB) mandates disclosure of pension asset composition and a description of investment strategy under SFAS 132R.Design/methodology/approachOur basic approach is to run linear regressions of firm-year assumed returns on the log of pension sensitivity measures, controlling for current and lagged actual returns from pension assets, fiscal year dummies and industry dummies. The larger the pension sensitivity ratios, the stronger the effects from inflated ERRs on reported earnings. We confirm the early results that the regression slopes are positive and highly significant. We construct an indicator variable DMC to capture the mandatory contributions firms face and another indicator variable D132R to capture the effect of SFAS 132R. DMC takes the value of one for fiscal years during which an acquisition takes place and zero otherwise. D132R takes the value of one for fiscal years after December 15, 2003 and zero otherwise.FindingsOur sample covers the period from June 1992 to December 2017. Our key results are as follows. The estimated coefficient (t-statistic) on DMC is 0.308 (6.87). Firms facing mandatory contributions tend to set ERRs at an average 0.308% higher. The estimated coefficient (t-statistic) on D132R is −2.190 (−13.70). The new disclosure requirement under SFAS 132R constrains all firms to set ERRs at an average 2.190% lower. The estimate (t-statistic) on the interactive term DMA×D132R is −0.237 (−3.29). When mandatory contributions happen during the post-SFAS 132R period, firms tend to set ERRs at 0.237% lower than they would do otherwise in the pre-SFAS 132R period.Originality/valueWhen firms face mandatory contributions, typically firm experience negative stock market returns. We examine whether managers manage earnings to mitigate such negative impact. We find that firms inflate assumed returns on pension assets to boost their reported earnings when facing mandatory contributions. We also find that managers alter earnings management behavior, in the case of mandatory contributions, following the introduction of new pension disclosure standards under SFAS 132R that become effective on December 15, 2003. Under the new SFAS 132R requirement, firms need to disclose asset allocation and describe investment strategies. This imposes restrictions on managers' discretion in making ERR assumptions, since now the composition of pension assets is a key determinant of the assumed expected rate of return on pension assets. Firms need to justify their ERRs with their asset allocations.

scholarly journals ANALISA PERILAKU MANAJEMEN TERHADAP PENERAPAN KOMPENSASI PROGRAM OPSI SAHAM EKSEKUTIF

2017 ◽  
Vol 11 (1) ◽  
pp. 19
Author(s):  
Nur Fadjrih Asyik
Keyword(s):  
Earnings Management ◽  
Stock Price ◽  
Compensation Effect ◽  
Phase 1 ◽  
Stock Option ◽  
Management Behavior ◽  
Phase 3 ◽  
Accounting Research ◽  
Earnings Information ◽  
The Difference

The purpose of this study is to investigate whether management who offer stock-based compensation which relatively big proportion to manage earnings information prior to grant date. While, this study also investigate the difference behavior of every step stock option offering. This paper contributes to that stream of accounting research by identifying several factors to manage earnings. The study finds that executives have ability to manage information around option grant date to find benefit stock price decreases before the grant date. Its show that the greater of stock option which granted to employee the more motive to manage decreasing earnings management prior to the grant date. The results are consistent with previous researchs that managers in the firms that offering the greater of stock option have the larger motivation to manage decreasing earnings so that can pay the stock option at the price of cheap (Chauvin & Shenoy, 2000; Baker et al., 2002; Balsam et al., 2003). While, based steps of stock option offering, the results of analysis show that there are the difference of influence of offer of the stock option on earnings management behavior at phase 1 and 2, while phase 3 do not differ from phase 1. The general conclusion is that magnitude of ESOP compensation effect earnings management behavior with supported by several conditional factors.

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