scholarly journals An investigation of the value relevance of deferred tax: the mediating effect of earnings management

2020 ◽  
Vol 17 (1) ◽  
pp. 317-328
Author(s):  
Walid Shehata Mohamed Kasim Soliman ◽  
Karim Mansour Ali
Keyword(s):  
Earnings Management ◽  
No Value ◽  
Management Practices ◽  
Value Relevance ◽  
Stock Exchange ◽  
Mediating Effect ◽  
Listed Firms ◽  
Deferred Tax ◽  
The Impact ◽  
Egyptian Stock Exchange

There is an academic discussion about the value relevance of deferred tax, which aims to find out the effect of deferred tax on the investors’ decisions. In light of this discussion, the first question is about the impact of deferred tax on management practices to manipulate earnings, which is called earnings management, the second question is about the value relevance of earnings management, the third question is about the value relevance of deferred tax, and the fourth question is about the mediating effect of earnings management. The paper focuses on listed firms in the Egyptian Stock Exchange (EGX), especially firms that were recorded in EGX 100, for six-year period (2013–2018) for 107 firms and 642 completed observations. The findings are as follows: management uses deferred tax to manipulate earnings, since an increase in deferred tax amounts increases earnings management practices; there is no value relevance of earnings management, which means earnings management practices do not affect the investors’ decisions; there is value relevance of deferred tax, which confirms that deferred tax is one of the determinants that affect the investors’ decisions; there is no value relevance of deferred tax through earnings management as a mediator variable since investors are not interested in earnings management practices to make their investment decisions. This paper investigates the relationship between deferred tax, earnings management, and value relevance in the Egyptian context.

scholarly journals Earnings Management and Value Relevance in Nigeria: A Pre and Post Ifrs Analysis

2018 ◽  
Vol 5 (5) ◽  
pp. 4672-4680
Author(s):  
Sunny O. Temile ◽  
Al Bahloul Mohammed ◽  
Dadang Prasetyo Jatmiko
Keyword(s):  
Earnings Management ◽  
Management Practices ◽  
Value Relevance ◽  
Stock Exchange ◽  
Outer Space ◽  
Financial Sector ◽  
Financial Information ◽  
Annual Reports ◽  
Space Law ◽  
The Impact

The purpose of this article is to analyse the literature concerning legal framework for outer space activities by states. Review was conducted on the elements of national space law, including literature critiquing particular strengths or weaknesses of existing laws and literature, on the obligations placed on States under international law and on why writers make particular recommendations as to the content of legislation. The article will summarise the key elements one would anticipate finding in the outer space regulatory framework and which will form the structure of the analytical framework when considering how States implement international space law in practice. In recent times, the issue of earnings management and value relevance has caused financial reports to come under scrutiny. With the introduction of the International Financial Reporting Standards (IFRS), a lot of studies have been carried out to see what kind of effect it has on key financial variables such as earnings management and value relevance of firms. Therefore, this study, “Earnings Management and Value Relevance in Nigeria: A Pre and Post IFRS Analysis”, examined the impact of IFRS on Earnings Management and Value Relevance of financial information in Non-Financial Companies quoted in the Nigerian Stock Exchange (NSE). Data gathered are from the financial statements and annual reports of 60 Companies from the Non-Financial Sector of the Nigeria Stock Exchange because companies in the financial sector are not overall amendable to accruals model. The empirical study covered the period from 2007 to 2016 statistical and econometric tools such as Panel data regression and paired samples tests. The results revealed an increase in value relevance, and a decrease in earnings management in the Post-IFRS era. Thus, we infer that earnings management level has decreased while value relevance has increased since IFRS adoption. This study therefore recommends that the relevant regulatory bodies should be empowered by the government to enable the formulation of effective measures and policies that check earnings management practices, and foster value relevance of the financial information presented in the annual reports and accounts of Nigerian companies.

scholarly journals Impact of Improved Corporate Governance and Regulations on Earnings Management Practices—Analysis of 7 Industries from the Indian National Stock Exchange

2021 ◽  
Vol 14 (10) ◽  
pp. 454
Author(s):  
Jose Joy Thoppan ◽  
Robert Jeyakumar Nathan ◽  
Vijay Victor
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Management Practices ◽  
Positive Impact ◽  
Stock Exchange ◽  
Accounting Standards ◽  
Discretionary Accruals ◽  
Manufacturing Firms ◽  
Listed Firms ◽  
The Impact

This study investigates discretionary earnings management practices, tracing the changes over the years in selected top performing and highly liquid listed Indian firms. It empirically measures the impact of corporate governance, financial legislation and global reporting standards on the firms’ earnings management practices. The study analyses a sample of 712 firm-year data comprising 89 listed Indian companies across 7 different sectoral indices of the National Stock Exchange of India (NSE) over 8 years (2011–2018). The Modified Jones model was used to compute Discretionary Accruals to measure Earnings Management based on data obtained using Bloomberg terminals. Statistical results and plots generated in Stata offer evidence that instances of earnings management have significantly reduced after the enactment of the Companies Act 2013 and the adoption of Indian Accounting standards which are converged with the IFRS. Findings suggest that services firms are engaging in relatively higher levels of earnings management compared to manufacturing firms. This study reveals the positive impact of improved corporate governance, regulation, and enforcement by significantly reducing the levels of earnings management among listed firms in India.

scholarly journals PERAN KEPEMILIKAN INSTITUSIONAL DALAM HUBUNGAN MANAJEMEN LABA DAN NILAI PERUSAHAAN

2020 ◽  
Vol 4 (1) ◽  
pp. 42-64
Author(s):  
Agus Satrya Wibowo
Keyword(s):  
Earnings Management ◽  
Firm Value ◽  
Management Practices ◽  
Value Relevance ◽  
Stock Exchange ◽  
Institutional Ownership ◽  
Production Costs ◽  
Manufacturing Companies ◽  
Real Activity ◽  
The Impact

This study aims to prove whether institutional ownership can reduce the impact of earnings management practices on firm value. Earnings management is proxied by accrual management, real activity manipulations based on abnormal production costs and abnormal discretionary expenses. Meanwhile, firm value is proxied by the metrics developed by Rhodes-Kropf et al (2005) which have the advantage of detecting misvaluation. The sample is manufacturing companies on the Indonesia Stock Exchange which have institutional ownership. The research period for 2010-2018 with panel data 410 samples observation. The findings show that institutional ownership can mitigate the effect of earnings management on firm value. Surprisingly, finding is that real activity manipulations based on abnormal discretionary expenses have the potential to destroy firm value. In other words, the market is penalizing the value of the company. These results contribute to the insight that the importance of the role of institutional ownership is to reduce information asymmetry in preventing the destruction of firm value. Furthermore, this finding is a supplement for investors, regulators and researchers in estimating the value relevance and improving the quality of accounting numbers in the context of firm value.

The Value Relevance of Earnings in the Presence of Earnings Management: Indonesia as Evidence

2021 ◽  
pp. 097215092110602
Author(s):  
Ratnaningrum Ratnaningrum ◽  
Rahmawati Rahmawati ◽  
Djuminah Djuminah ◽  
Ari Kuncara Widagdo
Keyword(s):  
Earnings Management ◽  
No Value ◽  
Value Relevance ◽  
Stock Exchange ◽  
Manufacturing Companies ◽  
Earnings Response Coefficient ◽  
Panel Data Regression ◽  
Data Regression ◽  
Earnings Response ◽  
The Impact

This study examines the influence of earnings management on the value relevance of earnings, that is, the value relevance of level and changes of earnings. The sample consists of manufacturing companies listed on the Indonesia Stock Exchange (IDX), comprising 606 observations. By using panel data regression, this study provides evidence that the level of earnings has no value relevance; conversely, changes in earnings have value relevance, indicating that earnings have less value relevance. Furthermore, the results of the relevance test of earnings value with the presence of earnings management show that the relevance of the value of the earnings level increases with the presence of earnings management; on the contrary, the relevance of earnings changes decreases with the presence of earnings management. Based on the value of earnings response coefficient, the impact of earnings management on the value relevance of level and changes of earnings appears to indicate that earnings management reduces the value relevance of earnings.

scholarly journals The Impact of Audit Committee Characteristics on Earnings Management: A Canadian Case Study

2015 ◽  
Vol 2 (1) ◽  
pp. 68
Author(s):  
Lynda Ioualalen ◽  
Hanen Khemakhem ◽  
Richard Fontaine
Keyword(s):  
Earnings Management ◽  
Audit Committee ◽  
Management Practices ◽  
Stock Exchange ◽  
Empirical Test ◽  
Control Group ◽  
Toronto Stock Exchange ◽  
Financial Expertise ◽  
The Impact

The objective of this study was to analyze the impact of three Audit Committee (AC) characteristics, financial expertise, diversity and activism on aggressive earnings management. We hypothesized that these AC characteristics are negatively related to aggressive earnings management. To test or hypothesis, we conducted an empirical test with a sample of 10 Canadian corporations listed on the Toronto stock exchange: 5 companies that were accused of aggressive earnings management and 5 other corporations used as a control group. We analyzed the 5-year period prior to the accusation (1999-2003). We measured earnings management by the level of discretionary accruals (using the modified Jones model (1995). Our results show that activism and the financial expertise of AC members are negatively related to aggressive earnings management; however, we did not find a significant relationship between diversity and aggressive earnings management. These results contribute to help governance oversight organizations identify AC characteristics that have the most influence on the detection of aggressive earnings management, which could help agencies develop and enforce methods to detect and reduce aggressive earnings management practices.

The extent of voluntary corporate disclosure in the Egyptian Stock Exchange

2017 ◽  
Vol 7 (2) ◽  
pp. 266-291 ◽  
Author(s):  
Hany Kamel ◽  
Emad Awadallah
Keyword(s):  
Earnings Management ◽  
Voluntary Disclosure ◽  
Management Practices ◽  
Developing Economies ◽  
Stock Exchange ◽  
Related Factor ◽  
Corporate Disclosure ◽  
Content Type ◽  
The Relationship ◽  
Egyptian Stock Exchange

Purpose The purpose of this paper is to investigate the current level of voluntary corporate disclosure in the Egyptian Stock Exchange. In addition, it explores the factors influencing the extensiveness of voluntary disclosure and examines the potential consequences of such disclosure in regards to the phenomenon of earnings management. Design/methodology/approach A relevant disclosure index to the Egyptian context was adopted to assess the level of voluntary disclosure in the 2010 annual reports of the most actively traded companies listed on the Egyptian Stock Exchange. The relationship between the extent of voluntary disclosure and each specific-related factor was examined using unranked and ranked OLS regression models. Meanwhile, a system of simultaneous equations was performed using a two-stage least squares regression model in order to investigate whether companies with higher levels of voluntary disclosure exhibit lower levels of earnings management practices. Findings The results indicate that the level of voluntary disclosure is positively responsive to specific corporate attributes, namely, the type of auditing firm and the two industries of Healthcare and Pharmaceuticals, and Chemicals. However, no significant indications were found that firm size, leverage, profitability and liquidity are important determinants of corporate disclosure. Also, the results show no evidence to support the prior anticipation that a higher level of voluntary disclosure reduces the ability of managers to make use of earnings management. On the contrary, it was found that leverage and the tendency of firms to avoid reporting declines in earnings are the main drivers of the phenomenon of earnings management in Egypt. Practical implications This paper has important implications for both domestic and overseas investors in Egypt as well as the regulatory authorities in the developing economies. Originality/value The main contribution of this paper is its focus on the extent of voluntary disclosure in a developing country such as Egypt, which has a high potential for economic growth in the near future. Besides, this paper is the first to examine the relationship between the level of voluntary disclosure and the phenomenon of earnings management in the Egyptian context.

scholarly journals The Effect of Good Corporate Governance (GCG) Mechanism on Earnings Management Practices of The Stubben Model (Study Case on Mining Sector Companies Listed on The Indonesia Stock Exchange 2014-2019)

2020 ◽  
Vol 5 (6) ◽  
Author(s):  
Muhammad Fairus ◽  
Pardomuan Sihombing
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Management Practices ◽  
Audit Quality ◽  
Stock Exchange ◽  
Sample Selection ◽  
Process Data ◽  
Mining Sector ◽  
Good Corporate Governance ◽  
The Impact

This study was prepared with the intention of analyzing the impact of the Good Corporate Governance (GCG) Mechanism on the Stubben Model of Profit Management (analysis of Mining Sector Companies on the Indonesia Stock Exchange for the period 2014-2019). The population used in the study is the mining sector companies on the IDX. The sample selection method used purposive sampling technique. To process data after sample selection, compile a research model, determine the variables analyzed in the study, and propose a hypothesis, the next step is to carry out data processing procedures through regression analysis with panel data. The results of the analysis conclude that (1) Institutional Ownership has a negative and significant impact on Earnings Management, (2) Managerial Ownership has a negative and significant impact on Earnings Management, (3) The Independent Board of Commissioners has a negative and significant impact on Earnings Management, (4) The Audit Committee has a negative and significant impact on Earnings Management, and (5) Audit Quality has a negative and significant impact on Earnings Management.

scholarly journals The Impact of Corporate Governance on Earning Management of Non-Financial Firms: Evidence from Pakistan

2021 ◽  
Vol 10 (1) ◽  
pp. 304-312
Author(s):  
MUHAMMAD TAHIR KHAN ◽  
IHTESHAM KHAN ◽  
SHAH RAZA KHAN
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Financial Reporting ◽  
Management Practices ◽  
Stock Exchange ◽  
Research Work ◽  
Fixed Effect Model ◽  
Earnings Information ◽  
Financial Firms ◽  
The Impact

The main objective of the firm is to maximize the shareholder’s wealth; to achieve this objective the management indulge the earnings information by manipulation practices such practices reduce investors’ confidence. Furthermore, a hypothetical dispute recommends that a better quality of financial reporting reduce the information asymmetry, by refining the corporate governance compliance, result in reducing earnings management practices. Thus the main aim of this study is to explore the impact of corporate governance on earnings management by using panel data sample of 257 non-financial firms listed in Pakistan stock exchange for the period of 2012 to 2019 through Fixed effect model along with control variables. The results disclose that the CG system of Pakistan negatively and significantly impacts the EM activities of the companies registered in Pakistan stock exchange. Hence, concludes that the CG system is more effective to prevent the EM process. The entire results are seamless with prior research work that the effective CG scheme of the firms controls the EM and collapse of businesses. Keywords: Earnings Management, Corporate Governance, Corporate Governance Index.

scholarly journals Examining the Effect of Joint and Dual Audits on Earnings Management Practices

2018 ◽  
Vol 8 (1) ◽  
pp. 84 ◽  
Author(s):  
Mohamed M. Mandour ◽  
Ali M. Elharidy ◽  
Ekramy S. Mokhtar
Keyword(s):  
Earnings Management ◽  
Management Practices ◽  
Stock Exchange ◽  
Positive Association ◽  
Real Earnings Management ◽  
External Audit ◽  
External Auditors ◽  
Audit Approach ◽  
Voluntary Adoption ◽  
The Impact

The purpose of the paper is to determine the impact of the voluntary adoption of the joint external audit approach in reducing earnings management practices through accruals and real operations compared with the adoption of the dual external audit approach. The research follows a quantitative approach to collect and analyze data from companies listed on the Egyptian Stock Exchange during the period 2010-2014. 104 firm-year observations are tested in the sample. The findings of the empirical study shows evidence that there are consistent earnings management practices in the studied sample regardless of the type of audit (joint or dual). There is a negative association between joint audit and discretionary accruals compared to dual audit. This means that firms with joint audit are less engaged in accrual earnings management practices. In addition, large firms that adopt joint audit are less engaged in accrual earnings management. However, there is no effect of joint audit on real earnings management practices compared to dual audit. Our results are consistent for firm size, profitability and leverage. Both firm profitability and leverage show positive association with earnings management practices while size did not have a significant effect on either type of practice. Finally, we find that firms with high (low) profitability that adopt joint audits are less (more) likely to engage in real earnings management practices. Our results are of use to regulators, external auditors and investors.

scholarly journals The impact of earnings management on market liquidity

2020 ◽  
Vol 17 (2) ◽  
pp. 389-396
Author(s):  
Do Thi Van Trang ◽  
Dinh Hong Linh
Keyword(s):  
Earnings Management ◽  
Stock Returns ◽  
Stock Price ◽  
Stock Exchange ◽  
Fixed Effect Model ◽  
Market Liquidity ◽  
Listed Firms ◽  
Daily Stock Returns ◽  
The Impact ◽  
Dollar Volume

This article investigates the impact of earnings management on market liquidity measured by the depth of the market. Managers have desired to provide amazing performance of companies, manage their earnings through non-discretionary accruals. Consequently, investors have trouble evaluating the stock value and misunderstanding of the market liquidity because of manipulated information.To this aim, the fixed-effect model (FEM) is implemented to analyze the financial information of 170 listed firms on the Vietnam Stock Exchange over the period 2013–2016. The empirical results emphasized that market liquidity is influenced by earnings management that means the higher level of earnings management, the better equity liquidity. The findings provide additional insight into the determinants of stock liquidity such as earnings management, firm size, daily trading dollar volume of stock, average daily trading dollar volume of the firm, daily returns of stock, daily stock returns, average closing stock price of the firm.

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