Study of the Impact of Private Equity on the Listed Companies’ Earnings Management

This research investigates the impact of financial distress on the magnitude of different earnings management approaches, namely real earnings management and accruals earnings management. This research utilizes a total of 2002 firm-year observations from 259 publicly-listed companies and 20 sub-industries in Indonesia from the year 2005 to 2014. Financial distress causes a significant increase of real earnings management and a significant decrease of accruals earnings management. It means that the healthier the company, the bigger the magnitude of real earnings management that is conducted through managing production costs and discretionary expenses. On the other hand, the lower the financial health of the company, the bigger the magnitude of accruals earnings management that is conducted through managing discretionary component of accruals.

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The Influence Of Public Equity Ownership On Earnings Management Through The Manipulation Of Operational Activities

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v30i6.8898 ◽

2014 ◽

Vol 30 (6) ◽

pp. 1847

Author(s):

Yura Kim

Keyword(s):

Earnings Management ◽

Capital Market ◽

Public Debt ◽

Private Equity ◽

Real Earnings Management ◽

Operational Activities ◽

Public Equity ◽

Reported Earnings ◽

The Impact ◽

Market Pressure

This paper examines whether public equity firms and private equity firms with public debt exhibit different degrees of real earnings management, defined as the manipulation of operational activities in order to influence reported earnings. Public equity firms face intense capital market scrutiny that their private equity counterparts do not. Therefore, this studys comparison of the two types of firms provides insight on the impact of capital market pressure on real earnings management behaviors. My results show that public equity firms are more likely than private equity firms to opportunistically alter normal operations to improve earnings by pushing sales through discounts and promotions, and by lowering costs of sales through overproduction. I find no difference in abnormal discretionary expenses between public equity and private equity firms. Although private equity firms with public debt do not face the same capital market pressure that public equity firms face, they are not immune from incentives to engage in real earnings management. Specifically, I find that private equity firms with public debt engage in real earnings management as their debt moves closer to default. Moreover, private equity firms with public debt that do engage in real earnings management appear to emphasize the zero earnings benchmark, consistent with prior research, suggesting that this benchmark is of primary importance to creditors.

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Heterogeneity of Top Management Team and Earnings Management: An Empirical Analysis of A-Share Listed Companies during 2010-2017

E3S Web of Conferences ◽

10.1051/e3sconf/202129202021 ◽

2021 ◽

Vol 292 ◽

pp. 02021

Author(s):

Mian Kou

Keyword(s):

Earnings Management ◽

Significant Negative Correlation ◽

Listed Companies ◽

Governance Structure ◽

Education Level ◽

Management Team ◽

Three Dimensions ◽

Strategic Decisions ◽

Professional Background ◽

The Impact

The behavior of corporate earnings management is an important factor restricting the development of the industry. Based on the senior echelon theory, TMT’s demographic characteristics such as the cognitive basis, observation, values and other characteristics, affect their strategic decisions, and thus affect the company’s performance and development of the industry. This paper selected 3588 listed companies from 2010-2017 using the revised Jones model to measure the earnings management degree of listed companies, and analyzed the impact of senior management team members on enterprise earnings management in three dimensions of age, education level and professional background. The study found there is no obvious correlation between the age heterogeneity of TMT and the degree of earnings management; the heterogeneity of the education level and the heterogeneity of professional background have a significant negative correlation with the degree of earnings management. This study can improve the corporate governance structure, promote the reform of the market supervision mechanism, protect the rights and interests of investors, and then promote the healthy development of the industry.

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