scholarly journals The Financial Characteristics of Firms Using Accrual Based Earnings Management

2019 ◽  
Vol 33 (6) ◽  
pp. 259-280
Author(s):  
Choi,Jong-Yoon
Keyword(s):  
Earnings Management ◽  
Financial Characteristics

scholarly journals Are Corporate Governance Mechanisms, Corporate Strategy, and Corporate Financial Characteristics Related to Earnings Management?

2020 ◽  
Vol 5 (2) ◽  
pp. 48-57
Author(s):  
Clarissa Tonay ◽  
Paulina Sutrisno
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Cash Flow ◽  
Audit Committee ◽  
Corporate Strategy ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
Operating Cash Flow ◽  
Financial Characteristics ◽  
Company Growth

Objective – This study aims to examine the effect of corporate governance and several factors of corporate financial characteristics on earnings management. Corporate governance mechanisms such as an independent board, board size, and audit committee size are expected to be able to limit the ability of management to carry out earnings management. Meanwhile, a company's financial characteristics such as corporate strategy, company age, operating cash flow, company growth, profitability, company size and leverage are predicted to affect earnings management. Methodology/Technique – Many previous studies have involved the examination of corporate governance mechanisms and corporate financial characteristics of earnings management however, the results of those studies give rise to inconsistencies. Hence, this study seeks to re-examine the existence of corporate governance mechanisms and corporate financial characteristics of earnings management. The sample in this research is non-financial companies listed on the Indonesian Stock Exchange between 2016 and 2018. Findings – This data in this study is analysed using statistical methods such as multiple regression linear. The results of this study indicate that one mechanism of corporate governance, the size of the audit committee, has a positive effect on earnings management, while the financial characteristics of companies such as company size and operating cash flow negatively affect earnings management. Novelty – Other corporate financial characteristics such as corporate strategy, company age, operating cash flow, and profitability have a positive effect on earnings management. Meanwhile, the other variables such as board size, leverage, and company growth do not have an influence on earnings management. Type of Paper: Empirical. JEL Classification: G3, G34, G39. Keywords: Earnings Management; Corporate Strategy; Audit Committee Size; Company Age; Operating Cash Flows. Reference to this paper should be made as follows: Tonay, C; Sutrisno, P. 2020. Are Corporate Governance Mechanisms, Corporate Strategy, and Corporate Financial Characteristics Related to Earnings Management? J. Fin. Bank. Review, 5 (2): 48 – 57 https://doi.org/10.35609/jfbr.2020.5.2(2)

Effects of capital structure and institutional–financial characteristics on earnings management practices

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jorge Andrés Muñoz Mendoza ◽  
Sandra María Sepúlveda Yelpo ◽  
Carmen Lissette Velosos Ramos ◽  
Carlos Leandro Delgado Fuentealba
Keyword(s):  
Earnings Management ◽  
Financial Development ◽  
Latin American ◽  
Management Practices ◽  
Short Term ◽  
Financial Policies ◽  
Financing Policy ◽  
Content Type ◽  
Financial Characteristics ◽  
Systematic Control

PurposeThe purpose of this article is to analyze the effects of financing policy and countries' institutional–financial characteristics on earnings management (EM) practices in Latin American companies.Design/methodology/approachThe GMM estimator was used according to Arellano and Bover (1995) for panel data on a sample of 983 Latin American companies between 1995 and 2017.FindingsLeverage and short-term debt have a negative and nonlinear effect on EM practices. Nonlinearity suggests that firms with high levels of leverage and short-term debt carry out positive discretionary accruals. Countries' institutional and financial development reduces EM practices. Mandatory IFRS adoption also reduces these practices and mitigates the effects of the low institutional and financial development on EM.Originality/valueThese results reveal the relevance of companies' financing policy as a means of controlling EM practices. Results also suggest that policy effectiveness decreases with leverage and short-term debt. It is suggested that policymakers design financial policies aimed to promote institutional and financial development as a means of systematic control over EM activities, which also includes IFRS.

Human behavior analysis under financial information science

2018 ◽  
Vol 36 (4) ◽  
pp. 685-704
Author(s):  
Feng Jui Hsu ◽  
Yu-Cheng Chen
Keyword(s):  
Earnings Management ◽  
Information Science ◽  
Forecast Error ◽  
Forecast Accuracy ◽  
Financial Information ◽  
Real Earnings Management ◽  
Analyst Forecast ◽  
Management Behavior ◽  
Content Type ◽  
Financial Characteristics

PurposeThe purpose of this paper is to investigate the relationships among corporate social responsibility (CSR), analyst forecast accuracy and firms’ earnings management behavior using US-based firms.Design/methodology/approachThe authors use the Kinder, Lydenberg, Domini (KLD) database to construct CSR performance scores and divide all firms into ten groups from high to low as a proxy for CSR performance. The authors obtained an initial sample of 33,364 firm-year observations from 1991 to 2012. Filtering for records which exist in the KLD, Compustat, and Center for Research in Security Prices databases lefts a total of 16,807 firm-year observations and CSR evaluation reports for 5,896 firms.FindingsThe authors find that high CSR-score firms have lower rates of analyst forecast error than their low CSR-score counterparts, suggesting that CSR performance is a useful means of forecasting earnings. Furthermore, firms with better CSR performance have significantly lower accrual-based earnings management behavior. However, the level of the manipulation behavior of real earnings management (REM) activities increased significantly in better CSR firms, suggesting that high CSR-score firms substituted REM methods for accrual-based methods. REM methods are consistent with the stipulations of the Sarbanes-Oxley Act and allow high CSR-score firms to better manipulate earnings behavior. These results hold after the authors control for various factors related to firm financial characteristics.Originality/valueOverall, the findings have important implications for investors and regulators to more easily assess firms’ earnings manipulation behavior and earnings stability under CSR performance and financial information in financial markets.

Are Corporate Governance Mechanisms, Corporate Strategy and Corporate Financial Characteristics Related to Earnings Management?

2020 ◽  
Vol 11 (1) ◽  
pp. 53-53
Author(s):  
Clariss Tonaya ◽  
Paulina Sutrisno
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Cash Flow ◽  
Audit Committee ◽  
Corporate Strategy ◽  
Company Size ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
Financial Characteristics ◽  
Company Growth

This study aims to examine the mechanism of corporate governance and several factors of corporate financial characteristics towards earnings management. Corporate governance mechanisms such as an independent board, board size, and audit committee size are expected to be able to limit management actions in carrying out earnings management. While the company's financial characteristics such as corporate strategy, company age, operating cash flow, company growth, profitability, company size and leverage are predicted to affect the earnings management. In previous studies, testing of corporate governance mechanisms and corporate financial characteristics of earnings management has been carried out, but there are still inconsistencies or debates from the results of previous studies so this study reexamined the existence of corporate governance mechanisms and corporate financial characteristics of earnings management in non-financial companies in Indonesia in period 2016-2018. The research problem in this study is whether corporate governance mechanisms such as independent board, board size, audit committee size and company financial characteristics such as corporate strategy, company age, operational cash flow, company growth, profitability, company size and leverage affect earnings management? Keywords: earnings management, corporate strategy, audit committee size, company age, operating cash flows

scholarly journals Cluster analysis of the economic activity of Slovak companies regarding potential indicators of earnings management

2021 ◽  
Vol 92 ◽  
pp. 07018
Author(s):  
Marek Durica ◽  
Lucia Svabova
Keyword(s):  
Cluster Analysis ◽  
Earnings Management ◽  
Economic Activity ◽  
Value Added ◽  
Hierarchical Cluster ◽  
Financial Data ◽  
Earnings Manipulation ◽  
Economic Activities ◽  
Financial Characteristics ◽  
Manipulation Detection

Research background: All over the world, any information about the earnings manipulation is very important for all the stakeholders of the companies. Therefore, it is necessary to detect this situation in a certain way. The global practice has shown that it is appropriate to create detection models and it would be very useful to specify individual sectors or the groups of sectors of economic activities of companies. Purpose of the article: The article aims to the financial ratios of Slovak companies that are globally used in the detection of earnings management. Based on hierarchical cluster analysis we identify groups of economic activities (according to the international NACE classification) with similar financial characteristics. Methods: For efficient earnings manipulation detection, high-quality and up-to-date financial data is required. We used financial data of real Slovak companies from the year 2018 obtained from international database Amadeus. After a precise pre-preparation of the dataset, we use the standard clustering procedures. Using the analysis of the dendrogram, the groups of the companies with their economic activities are identified. Findings & Value added: The results of the analysis show that there exist logical groups of NACE categories of economic activity of companies with similar characteristics. Regarding potential earnings manipulation, companies in these groups are as similar as possible. Therefore, financial characteristics can be analyzed together, and more accurate detection models could be created for them.

Earnings management behaviour of Shariah-compliant firms and non-Shariah-compliant firms

2015 ◽  
Vol 6 (2) ◽  
pp. 173-188 ◽  
Author(s):  
Omar Farooq ◽  
Allaa AbdelBari
Keyword(s):  
Earnings Management ◽  
United Arab Emirates ◽  
Information Disclosure ◽  
Common Law ◽  
Mena Region ◽  
Content Type ◽  
Crisis Period ◽  
Significant Difference ◽  
Financial Characteristics ◽  
The Impact

Purpose – This paper aims to answer the following questions by using the data from the MENA region (Morocco, Egypt, Saudi Arabia, United Arab Emirates, Jordan, Kuwait and Bahrain): Do Shariah-compliant firms differ from other firms in the quality of information disclosure? and Can investors consider information disclosed by Shariah-compliant firms more truthful than information disclosed by other firms? Design/methodology/approach – Using regression analysis, this paper examines the relationship between earnings management and Shariah compliance during the period between 2005 and 2009. Findings – Results show that Shariah-compliant firms engage in lower earnings management than non-Shariah-compliant firms. This paper argues that financial characteristics of Shariah-compliant firms (i.e. low leverage, low account receivables and low cash) provide lower chances to managers to misreport earnings. It is also shown that external conditions can minimize the difference in earnings management between the two groups. Results show no significant difference between earnings management of Shariah-compliant firms and earnings management of non-Shariah-compliant firms in the common law countries and during the crisis period. This paper considers high risk of litigation in common law countries and enhanced monitoring of stock market participants during the crisis period main factors behind these results. This paper argues that external governance mechanisms can result in improving disclosure practices of non-Shariah-compliant firms to a level that minimizes the impact of Shariah compliance on earnings management. Practical implications – Results have implications for investors and regulators functioning in the MENA region. These results indicate that non-Shariah-compliant firms, being more prone to earnings misreporting, need more scrutiny from regulators than Shariah-compliant firms. Originality/value – The authors believe that this paper is the first attempt to argue that it is the financial characteristics of Shariah-compliant firms (i.e. low leverage, low account receivables and low cash) that result in better disclosure of reported earnings.

Pengaruh Hubungan Politik Terhadap Manajemen Laba Pada Perusahaan Sektor Jasa Dengan Variabel Kontrol Ukuran Perusahaan Dan Kualitas Audit

2018 ◽  
Vol 16 (2) ◽  
pp. 30
Author(s):  
Dwikky Darmawan ◽  
Weny Putri
Keyword(s):  
Earnings Management ◽  
Firm Size ◽  
Significant Influence ◽  
Service Sector ◽  
Audit Quality ◽  
Stock Exchange ◽  
Secondary Data ◽  
Annual Reports ◽  
Political Connection ◽  
Discretionary Accrual

The purpose of this study is to determine the effects of political connection toward the earnings management of service sector companies with control variables firm size and audit quality. Firm�s political connection measured by using dummy variable. Earnings management is proxied by discretionary accrual which is measured by using Modified Jones Model. The research data applied in this study are the secondary data which are taken from the annual reports of service sector companies that listed in Indonesian Stock Exchange of 2016-2017 periods. There are 330 observations fit as sample, which are taken by using purposive sampling method. Data are processed by applying the multiple linear regression test. The result show that the political connection had positive but not significant influence to earnings management. Firm size had negative but not significant influence to earnings management. Whereas the audit quality had a negative and significant influence to earnings management.

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