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 Effect Of Short-Term Debt On Accrual Based Earnings Management And Real Earnings Management

2016 ◽  
Vol 32 (4) ◽  
pp. 1287-1300
Author(s):  
Sun-young Park
Keyword(s):  
Earnings Management ◽  
Financial Institutions ◽  
Liquidity Risk ◽  
Discretionary Accruals ◽  
Debt Financing ◽  
Real Earnings Management ◽  
Financing Constraints ◽  
Total Current ◽  
Short Term ◽  
Management Method

This study investigates whether short-term debt is related to earnings management. Short-term debt is divided into total current liabilities, debt in current liabilities and short-term borrowings. In addition, this study examines how short-term debt is related to how firms manage their earnings. I use discretionary accruals and real operating decisions as the earnings management method. The study finds that debt in current liabilities only has a statistically significant impact on accrual earnings management, and short-term borrowings are only shown to have a statistically significant impact on real earnings management. These results indicate that managers engage in accrual earnings management of debt included in current liabilities and use real earnings management of short-term borrowings from financial institutions.Therefore, this evidence indicates that managers engage in accrual earnings management of debt in included current liabilities when they face the liquidity risk of short-term debt, and the firms with debt financing constraints are likely to manage real earnings in spite of enhanced firm monitoring by lenders such as financial institutions. The findings in this study may have implications in the debate about the monitoring function of financial institutions such as banks.

The jinx of real earnings management: evidence from inefficient investments and debt maturity structure in Pakistan

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Umair Saeed Bhutta ◽  
Aws AlHares ◽  
Yasir Shahab ◽  
Adeel Tariq
Keyword(s):  
Earnings Management ◽  
Generalized Method Of Moments ◽  
Emerging Economy ◽  
Real Earnings Management ◽  
Investment Efficiency ◽  
Important Research ◽  
Short Term ◽  
Content Type ◽  
Listed Firms ◽  
The Impact

PurposeThis study aims to investigate two important research questions. First, this research examines the impact of real earnings management on investment inefficiency of the non-financial listed firms in Pakistan. Second, this research further explores the moderating role of short-term debt on the nexus between real earnings management and investment inefficiency. This study attempts to highlight an important research problem i.e. the jinx of real earnings management from the context of an emerging economy.Design/methodology/approachThis study employs the data from non-financial listed firms in Pakistan over the period from 2008 to 2018. The study uses panel data methodologies with firm and year fixed-effects to examine the proposed hypotheses. The results are robust to the use of sensitivity analysis, different estimation techniques and endogeneity issues (using two-stage least squares (2SLS) and generalized method of moments (GMM) techniques).FindingsThe results of the research are twofold. First, consistent with the theoretical arguments, the findings reveal that real earnings management increases investment inefficiency and results in over-investments by the firms. Second, short-term debt attenuates the relationship between real earnings management and investment inefficiency. It implies that a higher level of short-term debt weakens the adverse effects of real earnings management on the investment efficiency of the firm.Originality/valueThis study offers original findings on the issues pertaining to the quality of accounting and financial reporting in an emerging economy like Pakistan, where the implementation of regulations is weak in the corporate world and management frequently exploits shareholders' wealth for the short-term benefits.

Clawbacks and Earnings Management

2018 ◽  
Vol 31 (3) ◽  
pp. 129-151 ◽  
Author(s):  
Carolyn B. Levine ◽  
Michael J. Smith
Keyword(s):  
Numerical Analysis ◽  
Earnings Management ◽  
Cash Flows ◽  
Data Availability ◽  
Real Earnings Management ◽  
Interim Report ◽  
Short Term ◽  
Period Model ◽  
Jel Classifications

ABSTRACT This study addresses the effect of clawbacks on earnings management (EM). In a two-period model, the manager can report truthfully or distort an interim report using either accrual or real EM. The principal can make short-term payments based on a manipulable accounting signal and long-term payments based on unmanipulable cash flows. The strength of the clawbacks determines the likelihood that the manager's compensation is reclaimed when the interim report was managed. Stronger clawback provisions may result in (1) a substitution between accrual and real earnings management, or (2) earnings management when no earnings management was optimal with weak clawbacks, and (3) lower expected profits for the principal. Numerical analysis suggests that strong clawbacks do not reduce aggregate earnings management. JEL Classifications: J33; M48; M52; G38. Data Availability: All data are simulated.

Long-Term Orientation and Earnings Management Strategies

2019 ◽  
Vol 18 (3) ◽  
pp. 97-119 ◽  
Author(s):  
Jesper Haga ◽  
Fredrik Huhtamäki ◽  
Dennis Sundvik
Keyword(s):  
Earnings Management ◽  
High Precision ◽  
Management Strategy ◽  
Management Strategies ◽  
Real Earnings Management ◽  
Short Term ◽  
Country Level ◽  
Earnings Benchmarks ◽  
Jel Classifications

ABSTRACT In this study, we investigate how country-level long-term orientation affects managers' willingness to engage in earnings management and choice of earnings management strategy. Using a comprehensive dataset of 47 countries for the period from 2003 to 2015, we find that firms in long-term-oriented cultures rely relatively more on earnings management through accruals, while firms in short-term-oriented cultures engage in relatively more real earnings management. Furthermore, we find a larger discontinuity around earnings benchmarks in long-term-oriented cultures suggesting that manipulation of accruals enables benchmark beating with high precision. JEL Classifications: M14; M16; M21; M41.

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 Auditors’ view on acceptability of clients’ earnings management practices

2016 ◽  
Vol 13 (4) ◽  
pp. 535-541
Author(s):  
Farisha Hamid ◽  
Hafiza Aishah Hashim ◽  
Zalailah Salleh
Keyword(s):  
Earnings Management ◽  
Management Practices ◽  
Likert Scale ◽  
Management Activity ◽  
General Manager ◽  
Discretionary Accrual ◽  
Real Activities Manipulation

The purpose of this paper is to assess the views of auditors on earnings management in Malaysia. This study uses a questionnaire designed by Merchant and Rockness (1994), which consists of thirteen (13) short scenarios. Each scenario describes a potentially questionable earnings management activity undertaken by the general manager. The respondents were asked to judge the acceptability of each of the scenarios using a five-point (5) Likert scale. Based on responses, this study finds that acceptability varies with the type of earnings management. The auditors believe that discretionary accrual manipulation is more unethical than real activities manipulation, while the consistency with MFRS and the direction of effect on earnings management do not seem to be an issue to the respondents regarding the acceptability of earnings management

Short term real earnings management prior to stock repurchases

2017 ◽  
Vol 50 (1) ◽  
pp. 95-128 ◽  
Author(s):  
Lauren A. Cooper ◽  
Jimmy F. Downes ◽  
Ramesh P. Rao
Keyword(s):  
Earnings Management ◽  
Real Earnings Management ◽  
Stock Repurchases ◽  
Short Term
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