scholarly journals MASALAH KEAGENAN ALIRAN KAS BEBAS, MANAJEMEN LABA DAN RELEVANSI NILAI INFORMASI AKUNTANSI

2018 ◽  
Vol 15 (2) ◽  
pp. 232-246
Author(s):  
Aulia Fuad Rahman
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Stock Price ◽  
Value Relevance ◽  
Agency Problem ◽  
Free Cash Flow ◽  
Potential Conflict ◽  
Book Value ◽  
Negative Effect ◽  
The Impact

Free cash flow agency problem causes potential conflict of interest between managers and shareholders. Managers of firms with high free cash flow and of low growth opportunity tend to invest in marginal or even negative NPV project and use earnings management to camouflage the effects of non-wealth-maximizing investments. As a result, it is predicted that investors will react to earnings management and free cash flow agency problem and therefore reflected in stock price. In this sense, earnings management and free cash flow agency problem is predicted to have an impact on value relevance of accounting information.The objective of this study is to assess the impact of earnings management on value relevance of earnings and book value. This study also investigates the different effect of earnings management on value relevance of earnings and book value between free cash flow agency problem firms and non free cash flow agency problem firms. Result shows that earnings and book value are value relevance and earnings management decreases those value relevances. The result also conclude that the negative effect of earnings management on value relevance of earnings and book value is higher for free cash flow agency problem firms compared to non free cash flow agency problem firms.

scholarly journals MASALAH KEAGENAN ALIRAN KAS BEBAS, MANAJEMEN LABA DAN RELEVANSI NILAI INFORMASI AKUNTANSI

2017 ◽  
Vol 15 (2) ◽  
pp. 232
Author(s):  
Aulia Fuad Rahman
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Stock Price ◽  
Value Relevance ◽  
Agency Problem ◽  
Free Cash Flow ◽  
Potential Conflict ◽  
Book Value ◽  
Negative Effect ◽  
The Impact

Free cash flow agency problem causes potential conflict of interest between managers and shareholders. Managers of firms with high free cash flow and of low growth opportunity tend to invest in marginal or even negative NPV project and use earnings management to camouflage the effects of non-wealth-maximizing investments. As a result, it is predicted that investors will react to earnings management and free cash flow agency problem and therefore reflected in stock price. In this sense, earnings management and free cash flow agency problem is predicted to have an impact on value relevance of accounting information.The objective of this study is to assess the impact of earnings management on value relevance of earnings and book value. This study also investigates the different effect of earnings management on value relevance of earnings and book value between free cash flow agency problem firms and non free cash flow agency problem firms. Result shows that earnings and book value are value relevance and earnings management decreases those value relevances. The result also conclude that the negative effect of earnings management on value relevance of earnings and book value is higher for free cash flow agency problem firms compared to non free cash flow agency problem firms.

scholarly journals Agency cost of type I and accounting numbers in Australia and India

2016 ◽  
Vol 13 (4) ◽  
pp. 307-316 ◽  
Author(s):  
Lious Ntoung Agbor Tabot ◽  
Outman Ben Chettah ◽  
Eva Masárova
Keyword(s):  
Cash Flow ◽  
Manufacturing Industry ◽  
Value Relevance ◽  
Agency Problem ◽  
Agency Cost ◽  
Free Cash Flow ◽  
Service Industries ◽  
Type I ◽  
Book Value ◽  
Accounting Numbers

This paper has as objective to assess the agency cost of type I on the value relevance of accounting numbers (earnings and book value) for all listed firms in the manufacturing, retailing and service industries in Australia and India from 2005 to 2012 using the modified version of the Ohlson’ model in Faud and Mohd, (2008) where price is express as a linear function of earnings, book value and various accounting numbers. As predicted, the results show that both earnings and book value are value relevance for the manufacturing, retailing and servicing industry in Australia and India. The presence of the free cash flow agency problem caused the value relevance of earnings and book value to decline in Australia and India. However, the effect is not stable across the difference industries. The results show that in the manufacturing industry, the effect caused by the free cash flow agency problem is relatively higher for Australia and India than in the retail and service industries. As a result, the firms in the manufacturing with free cash flow agency problem have lower earnings (book value) coefficients than those without free cash flow agency problem

scholarly journals Determinan Manajemen Laba Perusahaan di Sektor Konsumsi

2019 ◽  
Vol 3 (2) ◽  
pp. 96
Author(s):  
Muhammad Fajri
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Cash Flow ◽  
Institutional Ownership ◽  
Free Cash Flow ◽  
Earning Management ◽  
Managerial Ownership ◽  
Leverage Ratio ◽  
Good Corporate Governance ◽  
The Impact

The aim of this research is to provide empirical evidence on the impact of good corporate governance, free cash flow, and leverage ratio on earnings management. Good corporate governance is measured by audit committee’s size, the proportion of independent commissioners, institutional ownership, and managerial ownership. Discretionary accrual is the proxy of earning management. This research used 28 consumer goods companies listed in Indonesia Stock Exchange from 2016 to 2018. Data were analyzed using panel data with random effect model. Based on the result of analysis concluded that all components of good corporate governance (audit committee’s size, the proportion of independent commissioners, institutional ownership, and managerial ownership), have no significant effect on earnings management, on other hand leverage ratio has a negative effect and no significant on earning management, and free cash flow has a positve and no significant effect on earnings management

Signaling Versus Free Cash Flow Theory: What Does Earnings Management Reveal About Dividend Initiation?

2017 ◽  
Vol 34 (2) ◽  
pp. 284-308 ◽  
Author(s):  
Deborah Drummond Smith ◽  
Anita K. Pennathur
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Stock Price ◽  
Flow Theory ◽  
Free Cash Flow ◽  
Real Earnings Management ◽  
Accrual Quality ◽  
Dividend Payout ◽  
Stock Price Reaction ◽  
Prior Literature

We examine earnings manipulation via discretionary accruals and real earnings management prior to the release of cash reserves back to shareholders. Previous research indicates that firms manage earnings upward when they increase dividends, creating a coordinated signal to the market. We study earnings management surrounding dividend initiation to determine whether management is manipulating earnings downward to avoid the discipline imposed by dividends in the years ahead or whether they are signaling to the market. We suggest that the aim of earnings management is not to reduce earnings but that earnings are more likely managed to preserve financial flexibility, create earnings reserves, and postpone shareholders’ expectations for initiating recurring dividends. Rather than signaling with upward earnings management, we find that dividend initiating firms manage earnings downward, consistent with the free cash flow theory. Our results explain findings in prior literature for the surprisingly stable earnings performance and accrual quality in the period just after dividend initiation. Furthermore, the market day stock price reaction is inversely related to earnings management, contradicting the purpose of signaling. We provide evidence that the managerial inertia for initiating dividends represents unique agency concerns compared with an increase in existing dividend payout and to the extent that downward real earnings management does not reverse, we identify a cost to shareholders for the quasi contract of recurring dividend payout.

scholarly journals The Impact of Surplus Free Cash Flow and Stock Market Segmentations on Earnings Management in Jordan: Agency - and Institutional - Theory Perspectives

2020 ◽  
Vol 19 (1) ◽  
Author(s):  
Ahmad A. Toumeh ◽  
Keyword(s):  
Stock Market ◽  
Earnings Management ◽  
Institutional Theory ◽  
Cash Flow ◽  
Management Practices ◽  
Stock Exchange ◽  
Positive Association ◽  
Free Cash Flow ◽  
Statistical Tool ◽  
The Impact

The current research aims at providing evidence concerning the influence of surplus free cash flow (SFCF) and stock market segmentations (SMS) on income-increasing earnings management practices in Jordan. The results, based on a sample of all non-financial companies that were listed on the Amman Stock Exchange (ASE) from 2013 to 2017, confirm the research hypotheses. The Huber-White’s sandwich standard errors for randomeffects regression was used as the primary statistical tool for this study. The findings revealed a significant and positive association between SFCF and income-boosting discretionary accruals (DAC). As well, the results found that SMS was significantly and positively associated with the positive DAC. This research adds value to scholarship by investigating the impact of SMS variable on earnings management. To the best available knowledge, this relationship has not been examined either in Jordan or elsewhere in the world. Further, this is the first empirical attempt to investigate the effect of SFCF on earnings management in Jordan, which provides meaningful information for companies seeking to understand and reduce agency problems within the Jordanian context. KEYWORDS: Earnings management; DAC; surplus free cash flow; SFCF; stock market segmentations; SMS; agency theory; institutional theory; Jordan.

scholarly journals The impact of pre-merger earnings management on non-cash acquisition premia: Evidence from the European market for corporate control

2015 ◽  
Vol 12 (4) ◽  
pp. 587-601 ◽  
Author(s):  
Malek Alsharairi ◽  
Emma L. Black ◽  
Christoph Hofer
Keyword(s):  
Mergers And Acquisitions ◽  
Earnings Management ◽  
Information Asymmetry ◽  
Cash Flow ◽  
Corporate Control ◽  
Free Cash Flow ◽  
Market For Corporate Control ◽  
Management Procedure ◽  
Investment Opportunities ◽  
The Impact

Using 1320 European mergers and acquisitions (M&As) completed between 2003 and 2012, this paper investigates patterns of earnings management and the implications for non-cash acquisition premia considering both the form of payment and the target firm’s listing status. The empirical evidence documented in this study suggests that management teams engage in pre-merger upward earnings management and that it is more evident for private rather than for publicly listed targets in order to compensate for the higher information asymmetry. This earnings management procedure leads to higher takeover premia even after controlling for variables such as the acquirer’s internal investment opportunities, profitability or available free cash flow.

scholarly journals Investigation on the value relevance of accounting information: evidence from incorporated companies in the Singapore capital market

2016 ◽  
Vol 13 (3) ◽  
pp. 9-21 ◽  
Author(s):  
Basil Abeifaa Der ◽  
Petr Polak ◽  
Masairol Masri
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Capital Market ◽  
Value Relevance ◽  
Accounting Information ◽  
Book Value ◽  
Valuation Model ◽  
Long Run ◽  
Short Run ◽  
Asset Turnover

The purpose of this study is to investigate the relative, incremental and the systematic changes in value relevance of the accounting information. This study also attempts to investigate the effect of earnings management on the value relevance of accounting information. It basically uses Ohlson’s (1995) valuation model to test the conceptual framework. The findings of this paper reveal that book value is more value relevant and incremental followed by earnings and, then, cash flow. Cash flow, however, performs a lesser valuation role. The results also show that combined book value and earnings are more value relevant than combined book value and cash flow. As a third contribution, the paper also finds that the value relevance of some accounting variables has increased over time, while others showed no evidence of their inclined or declined patterns in the value relevance of accounting information. Finally, the paper finds that earnings management has no effect on the value relevance of accounting information. Further analyses suggest that earnings management is opportunistic in the short run, but efficient in the long run, when firms are small or have high asset turnover

scholarly journals The Influence of Firms with Excess Free Cash Flow and Low Growth Perspective Towards Earning Management

2016 ◽  
Vol 3 (3) ◽  
pp. 380-397
Author(s):  
Marika Suma Raya Sembiring ◽  
Kathleen Kusuma Nugroho
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Significant Relationship ◽  
Audit Quality ◽  
Agency Problem ◽  
Free Cash Flow ◽  
Manufacturing Companies ◽  
Control Variables ◽  
Dividend Payment ◽  
The Relationship

This research aims to investigate whether firms with excess of free cash flow and low growth perspective are tend to engage in earnings management with several control variables included. We predict the relationship between each variable using multiple regressions model.  The data sample used is manufacturing companies listed in IDX from the year of 2012 to 201. The result of this research presents that there is no significant relationship between excess of free cash flow and earnings management. The reasons behind this result might be a difference in type of agency problem, in dividend policy, and in organization behavior widespread across the countries. However, we found a significant relationship between control variables to the dependent variable by means of discretionary accruals, which are firm size, IFRS implementation and audit quality towards earnings management. Keywords: Agency Problem, Earnings management, Excess Free Cash Flow, Dividend Payment.

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