An empirical assessment of real activities manipulation measures

2021 ◽  
Author(s):  
Subprasiri (Jackie) Siriviriyakul
Keyword(s):  
Earnings Management ◽  
Real Earnings Management ◽  
Opportunistic Behavior ◽  
Empirical Assessment ◽  
Real Activities Manipulation

I empirically assess the extent to which real earnings management metrics capture opportunistic behavior versus firms' fundamental factors such as performance. For the traditional proxies proposed by Roychowdhury (2006), I find (1) the economic magnitude of the proxies to be high relative to two relevant benchmarks; (2) they exhibit persistence; and (3) they vary predictably with performance. These findings suggest that the traditional proxies likely capture opportunistic behavior but also likely reflect fundamental factors. I also examine several adjusted proxies based on refinements proposed by subsequent studies. I find that those proposed by Vorst (2016) and those based on Kothari, Mizik, and Roychowdhury (2016) seem to be the most effective at attenuating correlation with underlying fundamentals. Additional simulation tests on bias and power reveal that, between the two adjusted proxies, those based on Kothari et al.'s (2016) are generally more preferable

The Effect of Board of Director Composition and Audit Committee Expertise on The Real Earnings Management in Indonesia

2020 ◽  
Vol 2 (1) ◽  
pp. 110-117
Author(s):  
Feby Astrid Kesaulya ◽  
Weny Putri ◽  
Dewi Sri
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Audit Committee ◽  
Good Governance ◽  
Real Earnings Management ◽  
The Real ◽  
Board Of Director ◽  
Good Corporate Governance ◽  
Board Director ◽  
Real Activities Manipulation

The Objective of this research was to prove that the implementation of good corporate governance will have an effect on the real activities manipulation which was done by the management. The implementations of good governance used by this research are board of director composition and audit committee expertise. This research was conducted in Indonesia by using 306 firm years’ observations. The result of this research showed a different result from previous researches. This research showed that the implementation of good corporate governance in the form of board director composition and audit committee expertise do not impact the practice of real activities manipulation. Or, in other words some of the good corporate governance tool could not mitigate the real activities manipulation in the company.

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 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 The Differential Choice Of Chaebol In Earnings Management

2015 ◽  
Vol 31 (5) ◽  
pp. 1909 ◽  
Author(s):  
Youngeun Hong ◽  
Taewoo Kim ◽  
Jongkook Park
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Positive Relationship ◽  
Negative Association ◽  
Real Earnings Management ◽  
Negatively Associated ◽  
Real Activities Manipulation

This study examines the methods of the differential choice of Korean chaebol in earnings management. Consistent with our prediction, we find a negative association between chaebols ownership and accrual-based earnings management, whereas there is no clear difference between chaebols ownership and real-based earnings management. Furthermore, we find evidence that chaebols exhibit a strongly positive relationship with overproduction-based real activities manipulation, indicating that chaebols prefer overproduction as a method of real earnings management. From additional analyses, we also find that abnormal cash flow from operations is negatively associated with suspect chaebol firm-years that just met zero.

PENGARUH MANAJEMEN LABA TERHADAP ABNORMAL RETURN

2009 ◽  
Author(s):  
Zirman Zirman ◽  
Lily Lily
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Significant Influence ◽  
Stock Price ◽  
Abnormal Return ◽  
Real Earnings Management ◽  
Financial Statement ◽  
Discretionary Accrual ◽  
Stock Price Reaction ◽  
Flow Components

This research investigates the consequence of earnings management by analyzing stock price reaction to the full set financial statement in 2008 which can be used by investors to detect earnings management by the firms. This research investigated two forms of earnings management (accrual and real earnings management). The samples is drawn from firms in IDX Statistic 2008 which categorized as active in frequency, value or volume. The method of analysis of this research used multi regression. The results show (1) discretionary accrual had negative significant influence to abnormal return, (2) abnormal cash flow from operation had negative significant influence to abnormal return. The results implicate that the investors are aware of the accrual earnings management (discretionary accrual) and real earnings management (abnormal cash flow) components in the earnings reported by the firms and they react negative to this components.

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