scholarly journals The Effect Of Short-Term Debt On Accrual Based Earnings Management And Real Earnings Management

2016 ◽  
Vol 32 (4) ◽  
pp. 1287-1300
Author(s):  
Sun-young Park
Keyword(s):  
Earnings Management ◽  
Financial Institutions ◽  
Liquidity Risk ◽  
Discretionary Accruals ◽  
Debt Financing ◽  
Real Earnings Management ◽  
Financing Constraints ◽  
Total Current ◽  
Short Term ◽  
Management Method

This study investigates whether short-term debt is related to earnings management. Short-term debt is divided into total current liabilities, debt in current liabilities and short-term borrowings. In addition, this study examines how short-term debt is related to how firms manage their earnings. I use discretionary accruals and real operating decisions as the earnings management method. The study finds that debt in current liabilities only has a statistically significant impact on accrual earnings management, and short-term borrowings are only shown to have a statistically significant impact on real earnings management. These results indicate that managers engage in accrual earnings management of debt included in current liabilities and use real earnings management of short-term borrowings from financial institutions.Therefore, this evidence indicates that managers engage in accrual earnings management of debt in included current liabilities when they face the liquidity risk of short-term debt, and the firms with debt financing constraints are likely to manage real earnings in spite of enhanced firm monitoring by lenders such as financial institutions. The findings in this study may have implications in the debate about the monitoring function of financial institutions such as banks.

scholarly journals SHORT-TERM DEBT AND FIRMS' EARNINGS MANAGEMENT CHOICES: THE CASE OF VIETNAM

2021 ◽  
pp. 47-57
Author(s):  
Quang Dang Vang ◽  
Van Hung Tran
Keyword(s):  
Earnings Management ◽  
Real Earnings Management ◽  
Short Term ◽  
Management Activity ◽  
Positive Correlation ◽  
Listed Firms ◽  
Management Method ◽  
Real Activities Manipulation

The primary purpose of this research is to explore the link between short-term debt and firms' earnings management choices. It focuses on understanding how and when short-term debt will improve or reduce the earnings management activity of companies. Our proxy for real earnings management is based on the measure developed by (Roychowdhury, 2006). Using a sample of listed firms in the period of 2009-2018 in Vietnam, the study determines an important positive correlation between short-term debt and real activities manipulation. Our results further show that firms having lower levels of short-term debt tend to use real earnings management activities, but those that have higher levels of short-term debt are prone to use accrual-based earnings management method rather than altering real activities, inducing an inverted U-shaped relationship between short-term debt and real earnings management.

scholarly journals Earnings management and income tax evidence from Greece

2015 ◽  
Vol 12 (2) ◽  
pp. 511-529 ◽  
Author(s):  
Eftychia Kapoutsou ◽  
Christos Tzovas ◽  
Constantinos Chalevas
Keyword(s):  
Earnings Management ◽  
Significant Relationship ◽  
Income Tax ◽  
Management Practices ◽  
Management Accounting ◽  
Discretionary Accruals ◽  
Earning Management ◽  
Total Current ◽  
Jones Model ◽  
Deferred Tax

The aim of this study is to examine the question of earnings management and, specifically, how this relates to taxation. In order to determine whether there is a correlation between earnings management and taxation, we investigate the discretionary accruals aspect of total accruals, i.e. the portion of profits which can be affected by management accounting choices, as calculated by the Jones (1991) model and the modified Jones model (Dechow et. al, 1995). Furthermore, we examine to what degree a correlation may exist between discretionary accruals and tax income (consisting of current and deferred tax). Our empirical findings demonstrate a statistically significant relationship between the levels of discretionary accruals and of total, current and deferred tax. This suggests that tax in general may be employed as a means to facilitate earnings management. The findings of this study suggest that IFRS provisions regarding taxation provide firms with a scope to get involved in earning management practices

scholarly journals Earnings Management And Privatisations: Evidence From Pakistan Evidence From Pakistan

2015 ◽  
Vol 54 (2) ◽  
pp. 79-96 ◽  
Author(s):  
Abdullah Muhammad Iqbal ◽  
Iram Khan ◽  
Zeeshan Ahmed
Keyword(s):  
Earnings Management ◽  
Discretionary Accruals ◽  
Cash Flows ◽  
Jel Classification ◽  
Short Term ◽  
Jones Model ◽  
Reported Earnings

This study examines the incidence of earnings management around the time of the privatisation of State Owned Enterprises in Pakistan during 1991-2005. Using the modified Jones model and a sample of large privatisations (minimum US$1 million), it shows that the sampled firms experienced increase in earnings, decrease in cash flows, and increase in current discretionary accruals in the year prior to and/or in the year of privatisation. The SOEs used both short term and long term accruals to inflate reported earnings. These accruals were reversed in the post-privatisation period. These findings suggest that managers of the firms slated for privatisation were engaged in earnings management to inflate their firms‘ financial worth to maximise the privatisation proceeds. Hence, we cannot reject the incidence of earnings management during privatisations in Pakistan. The results imply that the investors should carefully evaluate the to-be-privatised firms and keep in view the possibility of earnings management by the SOEs. JEL Classification: G14, G34, G38, L33, M41 Keywords: Earnings Management, Privatisations, SOEs, Pakistan, Accruals

Clawbacks and Earnings Management

2018 ◽  
Vol 31 (3) ◽  
pp. 129-151 ◽  
Author(s):  
Carolyn B. Levine ◽  
Michael J. Smith
Keyword(s):  
Numerical Analysis ◽  
Earnings Management ◽  
Cash Flows ◽  
Data Availability ◽  
Real Earnings Management ◽  
Interim Report ◽  
Short Term ◽  
Period Model ◽  
Jel Classifications

ABSTRACT This study addresses the effect of clawbacks on earnings management (EM). In a two-period model, the manager can report truthfully or distort an interim report using either accrual or real EM. The principal can make short-term payments based on a manipulable accounting signal and long-term payments based on unmanipulable cash flows. The strength of the clawbacks determines the likelihood that the manager's compensation is reclaimed when the interim report was managed. Stronger clawback provisions may result in (1) a substitution between accrual and real earnings management, or (2) earnings management when no earnings management was optimal with weak clawbacks, and (3) lower expected profits for the principal. Numerical analysis suggests that strong clawbacks do not reduce aggregate earnings management. JEL Classifications: J33; M48; M52; G38. Data Availability: All data are simulated.

Long-Term Orientation and Earnings Management Strategies

2019 ◽  
Vol 18 (3) ◽  
pp. 97-119 ◽  
Author(s):  
Jesper Haga ◽  
Fredrik Huhtamäki ◽  
Dennis Sundvik
Keyword(s):  
Earnings Management ◽  
High Precision ◽  
Management Strategy ◽  
Management Strategies ◽  
Real Earnings Management ◽  
Short Term ◽  
Country Level ◽  
Earnings Benchmarks ◽  
Jel Classifications

ABSTRACT In this study, we investigate how country-level long-term orientation affects managers' willingness to engage in earnings management and choice of earnings management strategy. Using a comprehensive dataset of 47 countries for the period from 2003 to 2015, we find that firms in long-term-oriented cultures rely relatively more on earnings management through accruals, while firms in short-term-oriented cultures engage in relatively more real earnings management. Furthermore, we find a larger discontinuity around earnings benchmarks in long-term-oriented cultures suggesting that manipulation of accruals enables benchmark beating with high precision. JEL Classifications: M14; M16; M21; M41.

scholarly journals Business cycles and earnings management strategies: a study in Brazilian public firms,

2019 ◽  
Vol 30 (80) ◽  
pp. 216-233 ◽  
Author(s):  
Edilson Paulo ◽  
Renato Henrique Gurgel Mota
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
Earnings Management ◽  
Management Strategies ◽  
Accounting Information ◽  
Discretionary Accruals ◽  
Real Earnings Management ◽  
Economic Environment ◽  
Opportunistic Behavior ◽  
The Business Cycle

ABSTRACT This study contributes to the literature dealing with the influence of macroeconomic factors on accounting information quality, since it analyzes the earnings management strategies of firms, specifically identifying different discretionary behaviors among economic cycles: 1) different levels of earnings management through accruals between phases of the business cycle, and 2) the trade-off between earnings management through accruals and real earnings management. The results indicate that the accounting information reported should be analyzed with greater caution by its users, especially in periods of great economic oscillations, when managers can increase or reduce opportunistic behavior. The research population comprised non-financial companies with shares traded on the São Paulo Stock, Commodities, and Futures Exchange (BM&FBovespa) and the sample was composed of 247 firms per year, covering the period from 2000 to 2015 and totaling 2,501 observations. The phases of business cycles were used as a proxy for the economic environment and were based on Schumpeter's (1939) study, which divides an business cycle into four distinct phases: expansion, recession, contraction, and recovery. Discretionary accruals were estimated according to the Pae (2005) and Paulo (2007) models. Real earnings management was estimated as described by Roychowdhury (2006), using only the abnormal behavior of production costs and operational decisions. The results of this research show that earnings management strategies, using either accruals or real manipulation, as well as the choice between these strategies, are impacted by the economic environment. The evidence suggests that managers have different opportunistic behavior in each phase of the business cycle. Specifically, they increase the level of discretionary accruals in contractionary phases and reduce it during recoveries, while they manage earnings downwards via real manipulation in recessions and contractions.

scholarly journals PENGARUH ASIMETRI INFORMASI TERHADAP MANAJEMEN LABA DENGAN GOOD CORPORATE GOVERNANCE SEBAGAI VARIABEL MODERASI

2017 ◽  
Vol 18 (1) ◽  
pp. 64
Author(s):  
Andri Veno ◽  
Noer Sasongko
Keyword(s):  
Corporate Governance ◽  
Linear Regression ◽  
Earnings Management ◽  
Multiple Linear Regression ◽  
Linear Regression Analysis ◽  
Discretionary Accruals ◽  
Multiple Linear Regression Analysis ◽  
Short Term ◽  
Good Corporate Governance

The purpose of this study was to analyze the effect on earnings management information asymmetry, which was moderated by good corporate governance in 43 companies listed on the Indonesian Stock Exchange (BEI). To 43 companies such as sample in this study included the top 10 best Corporate Governance Perception Index (CGPI) during the period 2004 - 2013. The sampling technique is purposive sampling. Earnings management as independent variables proxy through Short Term Discretionary Accruals (STDA) and Long Term Discretionary Accruals (LTDA), while moderating variable is a proxy through Corporate Governance Corporate Governance Perception Index (CGPI). This analysis using multiple linear regression that was previously done through classical assumption test. The results of multiple linear regression analysis on the model of the Short Term Discretionary Accruals (STDA) showed that the asymmetry of information and good corporate governance significantly positive effect on earnings management. The results of multiple linear regression analysis on the model of the Long-Term Discretionary Accruals (LTDA) showed that the asymmetry of information and good corporate governance significantly negative effect on earnings management. While variable existing office Good Governance can moderate the effect of asymmetry in earnings management in Short-Term Discretionary Accruals (STDA) and Long Term Discretionary Accruals (Ltda).

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