scholarly journals Information Earnings Management by Financial Accounting Structure of Listed Companies

2019 ◽  
Author(s):  
Ming Fan
Keyword(s):  
Earnings Management ◽  
Listed Companies ◽  
Financial Accounting

Earnings Management and Capital Resource Allocation: Evidence from China's Accounting-Based Regulation of Rights Issues

2004 ◽  
Vol 79 (3) ◽  
pp. 645-665 ◽  
Author(s):  
Kevin C. W. Chen ◽  
Hongqi Yuan
Keyword(s):  
Resource Allocation ◽  
Earnings Management ◽  
Listed Companies ◽  
Return On Equity ◽  
Rights Issue ◽  
Rights Issues ◽  
Over Time ◽  
Do So

From 1996 to 1998, listed companies in China were required to achieve a minimum return on equity (ROE) of 10 percent in each of the previous three years before they could apply for permission to issue additional shares. As a result of this rule, there was a heavy concentration of ROEs in the area just above 10 percent. We show that the Chinese regulators appear to have scrutinized firms using excess amounts of nonoperating income to reach the 10 percent hurdle. In addition, their ability to do so seems to have improved over time, which allows them to be better able to identify firms that subsequently performed better. However, many firms were still able to gain rights issue approval through excess nonoperating income. We show that these firms subsequently underperformed other approved firms that did not use the same practice, indicating that the Chinese regulators' objective of guiding capital resources toward the well-performing sectors is partially compromised by earnings management.

Earnings management and goodwill impairment

2016 ◽  
Vol 17 (1) ◽  
pp. 120-147 ◽  
Author(s):  
Giuseppe Davide Caruso ◽  
Elisa Rita Ferrari ◽  
Vincenzo Pisano
Keyword(s):  
Earnings Management ◽  
Design Methodology ◽  
Income Smoothing ◽  
Financial Accounting ◽  
Current Debate ◽  
Managerial Behavior ◽  
Content Type ◽  
Listed Firms ◽  
Goodwill Impairment ◽  
Research Questions

Purpose – The purpose of this paper is to understand whether managerial behavior in impairing goodwill arising from M & As has changed after the adoption of IAS/IFRS, searching for evidences of earnings management (EM) practices. Thus, our goal is to provide a response to the following research questions. Are goodwill impairments used by listed firms’ managers to manipulate earnings? If so, what kind of EM practice is mostly used? Design/methodology/approach – In this paper the authors tested the following hypothesis: H1. In the year of the deal’s closure and in the following four years, the management detects impairment of goodwill in difformity with the previous Italian regulations and related accounting practices. Moreover, the authors tried to determine, for each considered firms, potential symptoms of typical DEM practices widely debated in the financial accounting literature (income smoothing, income minimization, income minimization, or big bath accounting). Findings – Our analysis does not prove evidence of certain EM practices, but it highlights very clearly that, after the adoption of IAS/IFRS, managers’ behavior has deeply changed. Moreover, the analysis shows that there is no univocal choice in favor of a specific EM practice and that every firm pursues its own “strategy.” Originality/value – Considering the importance of the topic from both the perspectives of managerial (with regard to M & As valuation processes) and financial accounting (with regard to intangibles valuation fulfilled by applying the impairment test instead of the amortization), this work aims to provide a multi-dimensional contribution to the current debate.

scholarly journals A Study on the Relationship between Earnings Quality and Capital Cost-Takes the China Listed Companies as a Sample

2021 ◽  
pp. 48-56
Author(s):  
Chih-Yi Hsiao ◽  
Hui-Hui Kuang ◽  
Hui-Ling Li ◽  
Jia-Li Liu
Keyword(s):  
Earnings Management ◽  
Earnings Quality ◽  
Least Square Method ◽  
Listed Companies ◽  
Capital Cost ◽  
Least Square ◽  
Accounting System ◽  
Ordinary Least Square ◽  
Research Findings ◽  
The Relationship

The phenomenon of false financial statements still exists. However, in addition to the risk of being punished, what kind of price do companies have to pay? In recent decades, with China's rapid progress in economic, the relevant accounting system and corporate governance standards are actively improving, and the earnings quality is improving. This paper takes China's listed companies from 2015 to 2019 as samples, and adopts quantile regression supplemented by ordinary least square method to explore the relationship between earnings quality and capital cost. The research findings show that the higher the earnings management, the higher the capital cost, especially for the company with low capital cost. Nevertheless, for the extremely company with high capital cost, earnings management can reduce the capital cost. The research results can provide the focus of regulators of listed companies and reference for the revision of relevant accounting system.

Impairment reversals: unbiased reporting or earnings management

2018 ◽  
Vol 26 (2) ◽  
pp. 245-271 ◽  
Author(s):  
Tongyu Cao ◽  
Hasnah Shaari ◽  
Ray Donnelly
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Reporting Standard ◽  
Accounting Standard ◽  
Content Type ◽  
Study Support ◽  
A Company

Purpose This paper aims to provide evidence that will inform the convergence debate regarding accounting standards. The authors assess the ability of impairment reversals allowed under International Accounting Standard 36 but disallowed by the Financial Accounting Standards Board to provide useful information about a company. Design/methodology/approach The authors use a sample of 182 Malaysian firms that reversed impairment charges and a matched sample of firms which chose not to reverse their impairments. Further analysis examines if reversing an impairment charge is associated with motivations for and evidence of earnings management. Findings The authors find no evidence that the reversal of an impairment charge marks a company out as managing contemporaneous earnings. However, they document evidence that firms with high levels of abnormal accruals and weak corporate governance avoid earnings decline by reversing previously recognized impairments. In addition, companies that have engaged in big baths as evidenced by high accumulated impairment balances and prior changes in top management, use impairment reversals to avoid earnings declines. Research limitations/implications The results of this study support both the informative and opportunistic hypotheses of impairment reversal reporting using Financial Reporting Standard 136. Practical implications The results also demonstrate how companies that use impairment reversals opportunistically can be identified. Originality/value The results support IASB’s approach to the reversal of impairments. They also provide novel evidence as to how companies exploit a cookie-jar reserve created by a prior big bath opportunistically.

Instructional Case: General Host: Accounting for a Bond Refunding

1999 ◽  
Vol 14 (3) ◽  
pp. 451-464 ◽  
Author(s):  
Mary Beth Mohrman
Keyword(s):  
Earnings Management ◽  
Stock Prices ◽  
Cash Flows ◽  
Economic Consequences ◽  
Financial Accounting ◽  
Business Press ◽  
Paper Money ◽  
Book Values ◽  
The Relationship ◽  
Interest Expense

This assignment, which involves accounting for a simple bond refunding, achieves several objectives. First, it reinforces basic concepts in bond accounting, such as cash flows, book values, interest expense and gains/losses from early extinguishment. Second, it leads students to critically analyze an article from the popular business press. Third, it illustrates many important issues in financial accounting, such as earnings management, the relationship between earnings and stock prices, and economic consequences. Students are asked to read “Paper Money” from Forbes' “Numbers Game” column. The article describes General Host's bond exchange offer and questions the recognition of a gain in such circumstances. The case assignment requires students to carefully analyze the bond exchange and to question many of the authors' assumptions about the economic impacts of the exchange offer. I have used this case successfully in undergraduate intermediate accounting classes and in an introductory financial accounting course for M.B.A. students.

Baywatch International: A Case Linking Financial-Reporting, Business, and User Decisions

2000 ◽  
Vol 15 (4) ◽  
pp. 605-633 ◽  
Author(s):  
Fred Phillips ◽  
Kevin Morris ◽  
Kristina Zvinakis
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Financial Accounting ◽  
Financial Statement ◽  
Technical Knowledge ◽  
Capital Asset ◽  
Financial Statement Analysis ◽  
Accounting Courses ◽  
Reporting Decisions ◽  
Asset Depreciation

Baywatch International is a hypothetical company that manufactures figure-enhancement products—a rapidly growing industry that is featured frequently in Fortune and on CNNfn. The executives at Baywatch are making financial-reporting decisions pertaining to the company's receivables, inventories, loss contingencies, and capital asset depreciation. These decisions require technical knowledge of fundamental topics covered in introductory financial accounting courses, as well as an appreciation for relationships among financial-reporting, business, and user decisions. Consideration of the implications for financial statement analysis, earnings management, and financial-reporting ethics also is encouraged.

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