Accrual-Based and Real Earnings Management and Political Connections

CFA Digest ◽  
2015 ◽  
Vol 45 (11) ◽  
Author(s):  
Pamela G. Yang
Keyword(s):  
Earnings Management ◽  
Real Earnings Management ◽  
Political Connections

A review of the influence of political connections on management’s decision in non-US settings

2020 ◽  
Vol 18 (4) ◽  
pp. 687-705
Author(s):  
Ines Amara ◽  
Hichem Khlif
Keyword(s):  
Earnings Management ◽  
Voluntary Disclosure ◽  
Management Practices ◽  
Empirical Studies ◽  
Tax Avoidance ◽  
Economic Effects ◽  
Real Earnings Management ◽  
Political Connections ◽  
Future Research ◽  
Content Type

Purpose Given the interest in better understanding the economic effects of political connections, this paper aims to review empirical studies in the accounting and finance domain investigating the effects of firms’ political connections on management’s decision in non-US settings. Design/methodology/approach Key words used to search for relevant studies include “political connections” linked with “tax avoidance,” “earnings quality” “voluntary disclosure.” The authors consult several editorial sources including Elsevier, Electronic Journals Service EBSCO, Emerald, Springer, Palgrave Macmillan, Sage, Taylor & Francis and Wiley-Blackwell. The authors’ search yields 46 published studies since 2006. Findings The review reveals a prevalence of studies conducted in Asia. A narrative synthesis of empirical findings shows mixed effects of political connections on earnings management, as measured by accrual-based or real earnings management practices. Mixed evidence also exists for the association between political connections and reporting policy (e.g. corporate social responsibility reporting). The review also reveals that firms with political ties adopt an aggressive tax policy aimed at reducing effective tax rates and are more likely to choose a Big 4 auditor. Originality/value The review discusses the political connections literature focusing on studies outside of the USA and the effect of such connections on decision-making by management. It identifies some limitations of this literature and offers guidance for future research avenues. The synthesis suggests that political connections can adversely or beneficially impact management’s decisions depending on the legal, institutional and cultural characteristics prevailing in a particular setting.

scholarly journals Accrual-based and real earnings management and political connections

2015 ◽  
Vol 50 (2) ◽  
pp. 111-141 ◽  
Author(s):  
Geert Braam ◽  
Monomita Nandy ◽  
Utz Weitzel ◽  
Suman Lodh
Keyword(s):  
Earnings Management ◽  
Real Earnings Management ◽  
Political Connections

Earnings Management, Politically Connected CEOs, and Politically Connected Independent Board Members: Evidence from China

2017 ◽  
Vol 7 (1) ◽  
pp. 291
Author(s):  
Hong Fan
Keyword(s):  
Earnings Management ◽  
Real Earnings Management ◽  
Political Connections ◽  
Independent Directors ◽  
Board Members ◽  
Chinese Firms ◽  
Political Ties ◽  
Negative Impacts ◽  
Management Behaviors

This study investigates whether Chinese firms’ earnings management behaviors vary systematically with politically connected CEOs and studies the association between Chinese firms’ earnings management behaviors and the presence of politically connected independent board members. We find that firms with politically connected CEOs engage in less real earnings management, probably because their political connections make raising capital easier and reduce incentives for earnings management. However, this relationship is weaker in State-Owned Enterprises (SOEs) than in non-SOEs. In addition, we find that politically connected independent board members have significant negative impacts on real earnings management in non-SOEs, suggesting the independent directors with political ties could mitigate real earnings management.

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.

Real Earnings Management: The Auditor's Perspective

2014 ◽  
Author(s):  
Benjamin P. Commerford ◽  
Dana R. Hermanson ◽  
Richard W. Houston ◽  
Michael F. Peters
Keyword(s):  
Earnings Management ◽  
Real Earnings Management
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