Are Taxes a Determinant Factor in Earnings Management Behavior? Empirical Results from Brazilian Insurance Market

2014 ◽  
Author(s):  
Eduardo Flores ◽  
Joelson Oliveira Sampaio ◽  
George George Willrich
Keyword(s):  
Earnings Management ◽  
Insurance Market ◽  
Management Behavior ◽  
Empirical Results ◽  
Determinant Factor

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.

Fair Value Exposure, Auditor Specialization, and Banks’ Discretionary Use of the Loan Loss Provision

2017 ◽  
Vol 35 (2) ◽  
pp. 318-348 ◽  
Author(s):  
Brian Bratten ◽  
Monika Causholli ◽  
Linda A. Myers
Keyword(s):  
Earnings Management ◽  
Banking Industry ◽  
Fair Value ◽  
Loan Loss ◽  
Management Behavior ◽  
Management Tools ◽  
Loan Loss Provision ◽  
Value Reporting ◽  
Auditor Specialization ◽  
Industry Specialist

In this study, we examine whether banks’ use of the loan loss provision (LLP) to manage earnings is associated with (a) the extent to which banks hold assets subject to fair value reporting and (b) the use of an industry specialist auditor. We find that banks with a greater proportion of assets subject to fair value reporting (i.e., higher fair value exposure) use less LLP-based earnings management but more transaction-based earnings management (i.e., earnings management achieved by timing the realization of gains/losses). We also find that banks engaging industry specialist auditors use less LLP-based earnings management. Our findings suggest that banks’ use of the LLP to manage earnings is more limited when they have access to alternative earnings management tools and when they engage an auditor with more industry knowledge. Our results should be informative to regulators, members of the banking industry, and academics interested in the earnings management behavior of banks.

PERBEDAAN EARNINGS MANAGEMENTBERDASARKAN UKURAN PERUSAHAAN: STUDI EMPIRIS PADA PERUSAHAAN YANG TERDAFTAR DI BEI

2010 ◽  
Vol 6 (2) ◽  
pp. 139
Author(s):  
Fensy Oktavia Komala
Keyword(s):  
Earnings Management ◽  
Stock Exchange ◽  
Discretionary Accruals ◽  
Company Size ◽  
Management Behavior ◽  
Chi Square ◽  
Chi Square Test

The purpose of this reseacrh is to investigate Earnings management differences accross companies according to its size. Previous researches show company size tend to affect earnings management behavior. Sample are collected from companies listed on Indonesian Stock Exchange year over 2003-2009. Using Chi-Square Test, the result shows that statistically there is no differences of Earnings management magnitude between small, medium and large companies. Keywords:  Earnings Management, Discretionary Accruals, Non Discretionary Acruals, Total Accruals.

scholarly journals Influence of board interlocking on earnings management

2017 ◽  
Vol 28 (74) ◽  
pp. 179-196 ◽  
Author(s):  
Paulo Roberto da Cunha ◽  
Marcio Roberto Piccoli
Keyword(s):  
Earnings Management ◽  
Board Member ◽  
Management Practices ◽  
Earnings Quality ◽  
Sao Paulo ◽  
Centrality Measures ◽  
Board Members ◽  
Degree Centrality ◽  
Management Behavior ◽  
Governance Practices

ABSTRACT The participation of directors on more than one board is called “board interlocking”. This phenomenon contributes to the spread of management and governance practices, through directors sharing their knowledge and experiences on other boards. Thus, directors could “carry” the earnings management practices present in one company into another in which they sit on the board. It is assumed that the greater directors’ direct or indirect connections on boards, the greater the sharing of information, especially information that can be reflected in company earnings quality. In light of the above, the aim of this study is to verify the influence of board interlocking on earnings management in companies listed on the São Paulo Stock, Commodities, and Futures Exchange (BM&FBovespa). The study is characterized as descriptive, quantitative, and documentary, and uses a sample of companies listed on the BM&FBOVESPA between 2011 and 2013. For earnings management, the model from Kang and Sivaramakrishnan (1995) was used, while for interlocking, degree centrality measures were used for direct board member connections, and intermediation centrality for indirect connections. The results indicate that earnings management is influenced by the interlocking of board members. It is concluded that the greater the degree centrality, the greater positive earnings management is, and that variations in positive and negative accruals are influenced by board member intermediation. The results reinforce the idea that earnings management behavior can be transferred between companies by the directors that make up their boards.

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