scholarly journals VALUE RELEVANCE OF ACCOUNTING FIGURES IN PRESENCE OF EARNINGS MANAGEMENT. ARE ENFORCEMENT AND OWNERSHIP DIFFUSION REALLY ENOUGH?

2016 ◽  
Vol 17 (6) ◽  
pp. 1286-1299 ◽  
Author(s):  
Susana CALLAO ◽  
Riccardo CIMINI ◽  
José Ignacio JARNE
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Value Relevance ◽  
Value Added ◽  
Discretionary Accruals ◽  
Book Value ◽  
Moderating Factors ◽  
Accounting Numbers ◽  
Enforcement Mechanisms

The study assesses and compares the value relevance (VR) of accounting numbers in entities that experienced high discretionary accruals intensity and so possible earnings management (EM) behaviours, testing whether and in what extent the quality of enforcement and governance mechanisms act as moderating factors on the relation EM-VR. Based on a sample of 2 667 European non-financial entities, the results show that while the VR of earnings is low in entities that experienced high discretionary accruals intensity, book value increases its VR. The study also shows that the quality of enforcement mechanisms and the ownership diffusion (that proxies the quality of corporate governance) are effectively able to obstruct the loss of VR of earnings. The value added of the paper consists in showing that both the quality of enforcement and the ownership diffusion contrast only in part and in different manner the loss of VR of earnings, due to the presence of EM behaviours, acting only in part as moderating factors.

Do non-staggered board elections matter to earnings quality and the value relevance of earnings and book value?

2017 ◽  
Vol 16 (1) ◽  
pp. 46-66 ◽  
Author(s):  
Shuling Chiang ◽  
Gary Kleinman ◽  
Picheng Lee
Keyword(s):  
Corporate Governance ◽  
Board Of Directors ◽  
Stock Prices ◽  
Positive Relationship ◽  
Value Relevance ◽  
Earnings Quality ◽  
Discretionary Accruals ◽  
Content Type ◽  
Book Value ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of non-staggered voting for members of the board of directors on earnings quality and the value relevance of earnings and book value. Design/methodology/approach The authors used a sample of Taiwanese firms whose board was elected as a whole every three years from 2003 to 2013. The authors used multiple regression analysis to test whether board of directors elections and corporate governance affected earnings quality and the value relevance of earnings and book value. Findings The authors found that elections led to lower earnings quality, but better corporate governance led to greater earnings quality. In the presence of board elections, earnings have reduced value relevance but book value had increased value relevance. Finally, given board elections, the relative value relevance of earnings and book value on stock price was not fully moderated by strong corporate governance. Research limitations/implications The results presented here indicate the importance of better corporate governance in diffusing suspicions of management occasioned by the use of discretionary accruals in years in which board elections take place. Better corporate governance regimes led to a more positive relationship of discretionary accruals to earnings persistence, even in the presence of directorial elections. Similarly, better corporate governance regimes led to a more positive relationship between earnings per share and stock prices. Limitations include the restriction of the testing locale to Taiwan. That said, many companies around the globe use non-staggered board elections. Accordingly, these results suggest issues of importance to corporate governance advocates beyond Taiwan as well. Originality/value This study deepens the field’s understanding of the impact of corporate governance arrangements and schedules for electing board of directors’ members on issues of interest to stockholders.

Corporate governance, earnings management and the value-relevance of accounting information: Evidence from Pakistan

2018 ◽  
Vol 05 (03) ◽  
pp. 1850025
Author(s):  
Waqas Bin Khidmat ◽  
Man Wang ◽  
Sadia Awan
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Positive Impact ◽  
Value Relevance ◽  
Stock Exchange ◽  
Accounting Information ◽  
Annual Reports ◽  
Book Value ◽  
Governance Practices ◽  
Using Data

This paper examines the effect of corporate governance and earnings management on the value relevance of accounting information. Using data collected from the annual reports of non-financial companies listed in Pakistan Stock Exchange, it is concluded that earnings and book value are value relevant. The value relevance of earnings decreases while the value relevance of book value increases for the firms engaged in the earnings management. On the contrary, good corporate governance practices have a positive impact on the value relevance of earnings as well as the book value. Firm-specific characteristics enhance the predictive power of the model by more than 14%. A robustness test was carried out for alternative measures of earnings management. For this purpose, first performance-matched discretionary accruals were calculated following Kothari et al. (2005). Second, short-term accruals (DeChow, 1994), long-term accruals (Teoh et al., 1998b) and total accruals (Whelan, 2004), are calculated to analyze the effect on the value relevance of earnings and book value. The results support our null hypothesis.

The Impact of IFRS Adoption on Earnings Management Activities and Value Relevance of Accounting Information: Applied Study

2018 ◽  
Vol 1 (3) ◽  
pp. 11-42
Author(s):  
Mohamed Ibrahim Mohamed Hessian
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Value Relevance ◽  
Accounting Information ◽  
Discretionary Accruals ◽  
Economic Benefits ◽  
Financial Reporting Standards ◽  
Study Results ◽  
The Impact

This study focused on the economic benefits of adoption of IFRS. More specifically, this study emphasis on whether the quality of the accounting information has been improved after the adoption of IFRS. The study investigated quality of accounting information through two main variables: earnings management and the value relevance of accounting information. The study was applied on 56 Egyptian listed companies during the period from 1997 to 2011, which divided into two periods: the period after the adoption of the standards from 2007 to 2011, and before the adoption of the International Financial Reporting Standards from 1997 to 2006. The research concluded that there is a significant impact of the adoption of IFRS on managerial opportunities to manage earnings using discretionary accruals, which is reflected in the lower value relevance of accounting information. Study results also indicate that companies with high leverage are the lowest companies in the value relevance of accounting information, and that companies that are subject to private sector law No. 159 of 1981 are the most companies engaged in earnings management activities through discretionary accruals, large size companies, without any significant impact on future growth opportunities and listing on global exchanges.

scholarly journals Analisis Pengaruh Manajemen Laba Terhadap Nilai Perusahaan dengan Good Corporate Governance Sebagai Variabel Moderasi (Studi Kasus Pada Perusahaan Manufaktur yang Terdaftar di Bursa Efek Indonesia Tahun 2015-2017)

2019 ◽  
Vol 3 (6) ◽  
pp. 01
Author(s):  
Theresia Shirley Tanadi Dan Indra Widjaja
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Audit Committee ◽  
Stock Exchange ◽  
Discretionary Accruals ◽  
Manufacturing Firms ◽  
Analysis Method ◽  
Book Value ◽  
Basic Industry ◽  
Good Corporate Governance

The main objective of this research is to collect the empirical evidence of the influence of earnings management to the Firms’ value, with good corporate governance as the moderating variable, for Manufacturing Firms that are registered to the Indonesian Stock Exchange as of 2015 – 2017. Manufacturing Firms as the research subject, with Consumer Goods Industry and Basic Industry & Chemical sector. The research variables are (1) profit management, with proxy discretionary accruals modified jones; (2) Firm’s value, with proxy price to book value; and (3) good corporate governance, with proxy independent commissioner proportion and audit committee. This research used simple and moderated regression analysis method. The result indicates that earnings management has an impact on the Firms’ value and audit committee moderates the influence of earnings management to Firms’ value, whereas independent commissioner does not.

scholarly journals Value Relevance of Accounting Information in the Presence of Earnings Management

2020 ◽  
Vol 10 (2) ◽  
pp. 321
Author(s):  
Melinda Lydia Nelwan ◽  
Christo Simatupang ◽  
Billy Ivan Tansuria
Keyword(s):  
Time Series ◽  
Time Series Analysis ◽  
Earnings Management ◽  
Value Relevance ◽  
Accounting Information ◽  
Discretionary Accruals ◽  
Cash Flows ◽  
Book Value ◽  
Share Prices ◽  
Is Value

This study examines the value relevance of accounting information. This study investigates whether accounting information has impact on the share prices. In addition, it examines whether earnings management moderates the value relevance of accounting information to the market. Accounting information in this study consists of earnings, book value of equity, and cash flows, and the earnings management is proxied by discretionary accruals measured using the performance-adjusted modified Jones model. Using time series analysis, there are 98 samples of listed manufacturing corporations used in this study during 2014 which is the period of this study. The results show that earnings, book value of equity, and cash flows simultaneously affect the share prices, meaning that accounting information is value relevant to the market, although there is evidence that partially, only cash flows have impact on share prices. This study also found that the presence of earnings management weakens the value relevance of earnings. To some extent, the results indicate that earnings management eliminates the value relevance of earnings and cash flows.

scholarly journals ANALISIS PENGARUH KUALITAS PENERAPAN GOOD CORPORATE GOVERNANCE, LEVERAGE, DAN PROFITABILITAS TERHADAP NILAI PERUSAHAAN PERBANKAN DENGAN EARNINGS MANAGEMENT SEBAGAI VARIABEL INTERVENSI

2013 ◽  
Vol 3 (1) ◽  
pp. 41
Author(s):  
Ahmad Candra Rifandi ◽  
Utik Bidayati
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Firm Value ◽  
Self Assessment ◽  
Book Value ◽  
Earnings Growth ◽  
Management Quality ◽  
Good Corporate Governance ◽  
Equity Ratio

This study aims to obtain empirical evidence about the influence of  the quality of the implementation of good corporate governance, leverage, and profitability of the banking firm value when intervention by earnings management. Quality of the implementation of good corporate governance is measured by a composite score of good corporate governance self assessment by Bank Indonesia Circular Letter No. 9/12/DNDP May 30, 2007, leverage measured by debt-to-equity ratio (DER), profitability measured by earnings growth, earnings management is measured by discreationary accruals, and firm value is measured by the ratio of price book value (PBV). Results of this study showed that the only significant effect of leverage on earnings management. While the quality of the implementation of good corporate governance and profitability no significant effect on earnings management. Earnings management had no significant effect on firm value, and thus the quality of the implementation of good corporate governance, leverage, and profitability does not affect the firm value when it intervened by earnings management.

scholarly journals Corporate Governance and Accounting Earnings Management: The Case of Tunisia

2019 ◽  
Vol 9 (4) ◽  
pp. 370
Author(s):  
Azhaar Lajmi ◽  
Wided Khiari ◽  
Khaled Kanzari
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Audit Committee ◽  
Stock Exchange ◽  
Discretionary Accruals ◽  
Accounting Earnings ◽  
The Board Of Directors ◽  
Accounting Earnings Management ◽  
The Impact

This paper aims to test the impact of some corporate governance characteristics on the management of the accounting earnings measured by discretionary accruals. As for the prior research we treat the level of management of accounting earnings as a "proxy" for the quality of the accounting and financial information published by companies. Empirical analysis is based on the modified Jones model (1995) to estimate discretionary accruals and a panel data model applied to a sample of 21 companies listed on the Tunis Stock Exchange (BVMT) over a period of 3 years from 2008 to 2010. The main findings of the current study reveal that, in the Tunisian context, the affiliation of auditors to a "Big" international network and the independence of the board of directors significantly constrain the practice of managing the accounting earnings and, consequently, they improve the quality of the published result. However, the number of independent members in the audit committee has a negative but not significant impact on the practice of earnings management, whereas the duration of the audit mandate does not affect this practice.Finally, the control variables taken into account in our study have a significant effect on the quality of the accounting result.Thus, the results of this study helped to improve our understanding of earnings management in Tunisian companies, with reference to some characteristics of corporate governance.

scholarly journals Heterogeneity in earnings quality between different classes of companies after IFRS adoption: evidence from Brazil

2017 ◽  
Vol 28 (73) ◽  
pp. 113-131
Author(s):  
Roberto Black ◽  
Sílvio Hiroshi Nakao
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Value Relevance ◽  
Earnings Quality ◽  
Economic Incentives ◽  
Net Income ◽  
Accounting Earnings ◽  
Ifrs Adoption ◽  
Before And After

ABSTRACT This paper aims to investigate the existence of heterogeneity in earnings quality between different classes of companies after the adoption of the International Financial Reporting Standards (IFRS). IFRS adoption is generally associated with an increase in the quality of financial statements. However, companies within the same country are likely to have different economic incentives regarding the disclosure of information. Thus, treating companies equally, without considering the related economic incentives, could contaminate earnings quality investigations. The case of Brazil is analyzed, which is a country classified as code-law, in which tax laws determined accounting practice and in which IFRS adoption is mandatory. First, Brazilian companies listed on the São Paulo Stock, Commodities, and Futures Exchange (BM&FBOVESPA) were separated into two classes: companies issuing American Depositary Receipts (ADRs) before IFRS adoption and companies that did not issue ADRs until the adoption of IFRS. Then, this second class of companies was grouped, using cluster analysis, into two different subclasses according to economic incentives. Based on the groups identified, the quality of accounting earnings is tested for each class of the companies before and after IFRS adoption. This paper uses timely recognition of economic events, value relevance of net income, and earnings management as proxies for the quality of accounting earnings. The results indicate that a particular class of companies began showing conditional conservatism, value relevance of net income, and lower earnings management after IFRS adoption. On the other hand, these results were not found for the two other classes of companies.

scholarly journals The Combined Effects of Financial Derivatives and Discretionary Accruals on the Value Relevance of Earnings and the Book Value of Equity

2015 ◽  
Vol 17 (2) ◽  
pp. 179 ◽  
Author(s):  
Etty Murwaningsari ◽  
Sidharta Utama ◽  
Hilda Rossieta
Keyword(s):  
Value Relevance ◽  
Positive Association ◽  
Wald Test ◽  
Discretionary Accruals ◽  
Financial Derivatives ◽  
Combined Effects ◽  
Price Model ◽  
Negative Effects ◽  
Book Value ◽  
Sfas 133

This study aimed to understand (1) the association between the use of discretionary accruals and financial derivatives, taking into consideration the implementation of revised PSAK 55 (1999), which was adopted from SFAS 133; (2) the combined effects of derivatives and discretionary accruals on the value relevance of earnings and equity. The analysis used panel data regressions and the Wald test over the period from 2001-2008. The results showed a positive or complementary association between derivatives and discretionary accruals. The positive association implied that managers tended to intensify the use of discretionary accruals to offset a higher use of derivatives. Price and return models demonstrated negative significant effects of derivatives on the value relevance of earnings. The return model showed negative significant effects of discretionary accruals on the value relevance of earnings but negative effects on the value relevance of equity with the price model.

scholarly journals Political and financial background in board interlocking and earnings management in Brazil

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Cristian Baú Dal Magro ◽  
Roberto Carlos Klann
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Financial Reporting ◽  
Management Practices ◽  
Accounting Information ◽  
Real Earnings Management ◽  
The Political ◽  
Content Type ◽  
Quality Of Accounting Information

Purpose Although board interlocking underlying forces are largely hidden, the purpose of this paper is to provide managers, auditors, analysts, regulators and other stakeholders with sociological board interlocking information considering the different backgrounds of their members. Design/methodology/approach The research sample gathered 1,606 observations from 2010 to 2017. For data analysis, the direct and indirect board interlocking linkages, considering the different backgrounds of board members, established the centrality indicators. Subsequently, the authors used these indicators according to each measured background in the regression models. Findings The results indicate that the political background of board interlocking members is positively related to real earnings management practices, while the financial background has a mitigating effect on such practices. Research limitations/implications The findings suggest that individual skills and interests conveyed across the corporate social network have shaped corporate governance, with distinct impacts on the quality of accounting information. Practical implications The authors conclude that both backgrounds could have implications on agency conflicts, increasing (policy) or reducing (financial) information asymmetry between the company and its various stakeholders, which indicates that the authors must consider sociological and not just economic aspects within corporate governance. Social implications The sociological background of individuals is necessary for the congruence of monitoring mechanisms, and consequently, the quality of accounting information. Originality/value This study examines the influence of the political and financial background of board interlocking members on real earnings management practices in Brazilian publicly traded companies in the International Financial Reporting Standards post-adoption period.

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