The market reaction to unexpected earnings via discretionary accruals and sustainability reporting

ABSTRACT We empirically test whether audit quality is affected when part of an SEC issuer's audit is outsourced to auditors other than the principal auditor (“participating auditors”). We find a significantly negative market reaction and a significant decline in earnings response coefficients (ERCs) for experimental issuers disclosed for the first time as having participating auditors involved in their audits. However, we find no market reaction and no decline in ERCs for a matching sample of issuers that are not disclosed as using participating auditors, nor for issuers disclosed for the second or third time as using participating auditors. We also find actual audit quality as measured by absolute value of performance-matched discretionary accruals is lower for the experimental issuers, although we find no difference in audit fees paid by the experimental and matching issuers in a multivariate model. Our findings suggest that the PCAOB's proposed rule requiring disclosure of the use of other auditors in addition to the principal auditor would provide information useful to investors in assessing audit quality for SEC issuers.

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Sustainability Reporting and Discretionary Accruals of Multinational Corporations in Sub-Saharan Africa

10.7176/rjfa/12-24-02 ◽

2021 ◽

Keyword(s):

Multinational Corporations ◽

Sustainability Reporting ◽

Discretionary Accruals ◽

Sub Saharan Africa ◽

Sub Saharan

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PENGARUH MEKANISME CORPORATE GOVERNANCE, KINERJA LINGKUNGAN DAN PENGUNGKAPAN LINGKUNGAN PERUSAHAAN TERHADAP REAKSI PASAR

El Muhasaba Jurnal Akuntansi ◽

10.18860/em.v4i2.2453 ◽

2014 ◽

Vol 4 (2) ◽

Author(s):

Bayu Tri Mukti Mukti ◽

Made Sudarma ◽

Grahita Chandrarin

Keyword(s):

Corporate Governance ◽

Stock Prices ◽

Environmental Performance ◽

Stock Price ◽

Market Reaction ◽

Stock Exchange ◽

Sustainability Reporting ◽

Governance Mechanism ◽

Environmental Disclosure ◽

Good Corporate Governance

Abstract The purpose of this study was to analyze the market reaction as indicated by rising the stock price as a result of the implementation corporate governance mechanisms, environmental performance and corporateenvironmental disclosure published on the annual report in 2010. This study uses hypothesis testing approach to explain the causal relationship between the variables of the study. The population in this study is a registered company in Indonesia Stock Exchange. The results show that the application of corporate governance mechanism through the principles of good corporate governance has a significant effect on the market reaction that is proxied by stock prices. The tests performed on the environment performance and environment disclosure which is proxied by the Rating of Company Performance in Environmental Management (PROPER) and the Indonesian Sustainability Reporting Award (ISRA) found that there is no significant effect on the market reaction that is proxied by stock prices. Keywords: Corporate Governance, Environmental Performance, Environmental Disclosure, and Stock Price. Abstrak Tujuan penelitian ini adalah untuk menganalisis reaksi pasar yang ditunjukkan dengan meningkatnya harga saham sebagai akibat dari penerapan mekanisme corporate governance, publikasi pemeringkatan kinerja lingkungan dan publikasi pemeringkatan pengungkapan lingkungan perusahaan pada saat publikasi laporan tahunan tahun 2010. Penelitian ini menggunakan pendekatan hypotesis testing untuk menjelaskan hubungan kausal antara variabel-variabel penelitian. Populasi dalam penelitian ini adalah perusahaan yang terdaftar di Bursa Efek Indonesia. Hasil pengujian menunjukkan bahwa penerapan mekanisme corporate governance melalui prinsip-prinsip good corporate governance memiliki pengaruh yang signifikan terhadap reaksi pasar yang diproksikan dengan harga saham. Pengujian yang dilakukan terhadap aspek lingkungan sosial perusahaan yaitu kinerja lingkungan dan pengungkapan lingkungan perusahaan yang masing-masing diproksikan oleh Peringkat Kinerja Perusahaan Dalam Pengelolaan Lingkungan Hidup (PROPER) dan Indonesian Sustainability Reporting Award (ISRA) belum mampu menunjukkan adanya pengaruh yang signifikan terhadap reaksi pasar yang diproksikan dengan harga saham. Kata Kunci: Corporate Governance, Kinerja Lingkungan, Pengungkapan Lingkungan, dan Harga Saham

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Asset Write-Offs and Discretionary Accruals: Roles of Executives' Incentives, Corporate Governance, and Market Reaction*

SSRN Electronic Journal ◽

10.2139/ssrn.1267079 ◽

2008 ◽

Author(s):

Chia-Ling Chao

Keyword(s):

Corporate Governance ◽

Market Reaction ◽

Discretionary Accruals

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Discretionary Accruals and Earnings Management: An Analysis of Pseudo Earnings Targets

The Accounting Review ◽

10.2308/accr.2006.81.3.617 ◽

2006 ◽

Vol 81 (3) ◽

pp. 617-652 ◽

Cited By ~ 117

Author(s):

Benjamin C. Ayers ◽

John (Xuefeng) Jiang ◽

P. Eric Yeung

Keyword(s):

Earnings Management ◽

Positive Association ◽

Discretionary Accruals ◽

Cash Flows ◽

Earnings Distribution ◽

Management Incentives ◽

Discretionary Accrual ◽

Unexpected Earnings ◽

Earnings Benchmarks ◽

Earnings Targets

We investigate whether the positive associations between discretionary accrual proxies and beating earnings benchmarks hold for comparisons of groups segregated at other points in the distributions of earnings, earnings changes, and analystsbased unexpected earnings. We refer to these points as “pseudo” targets. Results suggest that the positive association between discretionary accruals and beating the profit benchmark extends to pseudo targets throughout the earnings distribution. We find similar results for the earnings change distribution. In contrast, we find few positive associations between discretionary accruals and beating pseudo targets derived from analysts-based unexpected earnings. We develop an additional analysis that accounts for the systematic association between discretionary accruals and earnings and earnings changes. Results suggest that the positive association between discretionary accruals and earnings intensifies around the actual profit benchmark (i.e., where earnings management incentives may be more pronounced). We find similar effects around the actual earnings increase benchmark. However, analogous patterns exist for cash flows around the profit and earnings increase benchmarks. In sum, we are unable to eliminate other plausible explanations for the associations between discretionary accruals and beating the profit and earnings increase benchmarks.

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Perbedaan Reaksi Pasar pada Perusahaan Pemenang Indonesia Sustainability Reporting Award (Isra) ( Studi Kasus pada Perusahaan Pemenang ISRA periode 2009-2011)

Telaah Bisnis ◽

10.35917/tb.v15i1.10 ◽

2016 ◽

Vol 15 (1) ◽

Author(s):

Randika Bagus Linuwih ◽

Yeterina Widi Nugrahanti

Keyword(s):

Abnormal Return ◽

Trading Volume ◽

Market Reaction ◽

Stock Exchange ◽

Sustainability Reporting ◽

Sign Test ◽

Volume Activity ◽

Market Models ◽

Before And After ◽

Research Show

ABSTRACTThe purpose of this study is to examine the change ofmarket reaction arround the date of Indonesia Sustainability Reporting Award (ISRA announcement. The market reaction is measured byabnormal return dan trading volume activity.The sample of the study consist of 25 companies listed on the Indonesian Stock Exchange which accept the appreciation of ISRA in 2009-2011. Data that used in this study consist of share’s daily closing priceand daily trading volume. The estimation period is 30 days and event period is 11 days by using Market Models. Technique of analyzed for examining the hypothesis is Wilcoxon Sign Test at level significant of 10%.The results of this research show that ISRAannouncementdid not get any response from the investors, because there were no significant changes to the abnormal return before and after the announcement.The examination of trading volume activity proves that there are any significant differences in trading volume activity especially on fifth day and second day before the announcement, and the first day and second day after ISRA 2009-2011 announcement.

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PENGARUH MEKANISME CORPORATE GOVERNANCE, KINERJA LINGKUNGAN DAN PENGUNGKAPAN LINGKUNGAN PERUSAHAAN TERHADAP REAKSI PASAR

El Muhasaba Jurnal Akuntansi ◽

10.18860/em.v4i1.2328 ◽

2013 ◽

Vol 4 (1) ◽

Cited By ~ 1

Author(s):

Bayu Tri Prasetio Mukti

Keyword(s):

Corporate Governance ◽

Stock Prices ◽

Environmental Performance ◽

Stock Price ◽

Market Reaction ◽

Stock Exchange ◽

Sustainability Reporting ◽

Governance Mechanism ◽

Environmental Disclosure ◽

Good Corporate Governance

The purpose of this study was to analyze the market reaction as indicated by rising the stock price as a result of the implementation corporate governance mechanisms, environmental performance and corporate environmental disclosure published on the annual report in 2010. This study uses hypothesis testing approach to explain the causal relationship between the variables of the study. The population in this study is a registered company in Indonesia Stock Exchange. The results show that the application of corporate governance mechanism through the principles of good corporate governance has a significant effect on the market reaction that is proxied by stock prices. The tests performed on the environment performance and environment disclosure which is proxied by the Rating of Company Performance in Environmental Management (PROPER) and the Indonesian Sustainability Reporting Award (ISRA) found that there is no significant effect on the market reaction that is proxied by stock prices. Keywords: Corporate Governance, Environmental Performance, Environmental Disclosure, and Stock Price. ABSTRAK Tujuan penelitian ini adalah untuk menganalisis reaksi pasar yang ditunjukkan dengan meningkatnya harga saham sebagai akibat dari penerapan mekanisme corporate governance, publikasi pemeringkatan kinerja lingkungan dan publikasi pemeringkatan pengungkapan lingkungan perusahaan pada saat publikasi laporan tahunan tahun 2010. Penelitian ini menggunakan pendekatan hypotesis testing untuk menjelaskan hubungan kausal antara variabel-variabel penelitian. Populasi dalam penelitian ini adalah perusahaan yang terdaftar di Bursa Efek Indonesia. Hasil pengujian menunjukkan bahwa penerapan mekanisme corporate governance melalui prinsip-prinsip good corporate governance memiliki pengaruh yang signifikan terhadap reaksi pasar yang diproksikan dengan harga saham. Pengujian yang dilakukan terhadap aspek lingkungan sosial perusahaan yaitu kinerja lingkungan dan pengungkapan lingkungan perusahaan yang masing-masing diproksikan oleh Peringkat Kinerja Perusahaan Dalam Pengelolaan Lingkungan Hidup (PROPER) dan Indonesian Sustainability Reporting Award (ISRA) belum mampu menunjukkan adanya pengaruh yang signifikan terhadap reaksi pasar yang diproksikan dengan harga saham. Kata Kunci: Corporate Governance, Kinerja Lingkungan, Pengungkapan Lingkungan, dan Harga Saham

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PENGARUH REAKSI PASAR ATAS PENGUMUMAN INFORMASI LABA PERUSAHAAN BERKAITAN DENGAN MANAJEMEN LABA PADA PERUSAHAAN MANUFAKTUR DI BURSA EFEK INDONESIA

Business Management Journal ◽

10.30813/bmj.v11i2.629 ◽

2017 ◽

Vol 11 (2) ◽

Author(s):

Theresia Sri Hastuti ◽

Henilia Yulita

Keyword(s):

Sampling Method ◽

Management Practices ◽

Market Reaction ◽

Investment Decision ◽

Relevant Information ◽

Discretionary Accruals ◽

Earning Management ◽

Financial Report ◽

Convenience Sampling ◽

The Difference

Financial report is an important factor for inventors to make investment decision in capital market. Publicly financial report which has relevant information will be reacted by market player. Many investors and other users of financial report do not pay attention to the process of publishing financial report, so it pushes the emergence of dysfunctional behaviours like earning management practices. The research aims to analyze the difference of market reaction between:1) earning management companies and non-earning management companies; 2) income-decreasing discretionary accruals companies and income-increasing discretionary accruals companies.Population of this research is 130 manufactured companies listed in JSX during 2009-2010. Using convenience sampling method, 49 companies were taken to become final samples for each period. The result with two independent samples test Kruskal Walles χ (sign 5%) shows that there was no difference of market reaction between earning management companies and non-earning management companies (χ 0,58989 dan 0,03137), and neither was there between income-decreasing discretionary accruals companies and income-increasing discretionary accruals companies (χ 0,735 dan 2,82767). Keywords : Earning Management, Market Reaction.

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The Relationship Between Returns And Unexpected Earnings: A Comparison Of Australia And The United States

Journal of Business & Economics Research (JBER) ◽

10.19030/jber.v1i8.3039 ◽

2011 ◽

Vol 1 (8) ◽

Author(s):

Mark Myring ◽

Rebecca Toppe Shortridge ◽

Lucinda Van Alst

Keyword(s):

United States ◽

Stock Markets ◽

Market Reaction ◽

The United States ◽

Forecast Errors ◽

Short Term ◽

Unexpected Earnings ◽

Earnings Per Share ◽

Earnings Releases ◽

The U.S

This paper examines a relatively short-term market reaction to unexpected earnings in Australia and the United States (U.S.).  Using data from 1987 to 1998, we test the existence of a short-term market reaction to the release of earnings in both countries. Because accounting standards, stock market characteristics and culture are similar in the two countries, we expect similar market responses to earnings releases.  The results indicate that both the Australian and the U.S. markets react relatively quickly to earnings releases. We also examine the incremental explanatory power of analysts’ forecast errors over the change in earnings per share.  Both the change in earnings per share and analysts’ forecast errors are expected to provide information to the market.  The results from this hypothesis conform to expectations, as both pieces of information are associated with market returns in the two countries.  Finally, we utilize t-tests to examine if the coefficients between Australia and the U.S. are different.  If so, differences in accounting, stock markets, and/or culture alter how information is processed between the two countries.  This hypothesis is not supported.  In sum, the U.S. and Australian stock markets react similarly to the release of unexpected earnings.

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Do Nonaudit Services Compromise Auditor Independence? Further Evidence

The Accounting Review ◽

10.2308/accr.2003.78.3.611 ◽

2003 ◽

Vol 78 (3) ◽

pp. 611-639 ◽

Cited By ~ 913

Author(s):

Hollis Ashbaugh ◽

Ryan LaFond ◽

Brian W. Mayhew

Keyword(s):

Firm Performance ◽

Research Design ◽

Market Reaction ◽

Discretionary Accruals ◽

Analyst Forecasts ◽

Auditor Independence ◽

Benchmark Tests ◽

Nonaudit Services ◽

Auditor Fees

This paper challenges the findings of Frankel et al. (2002) (FJN). The results of our discretionary accruals tests differ from FJN's when we adjust discretionary current accruals for firm performance. In our earnings benchmark tests, in contrast to FJN we find no statistically significant association between firms meeting analyst forecasts and auditor fees. Our market reaction tests also provide different results than those reported by FJN. Overall, our study indicates that FJN's results are sensitive to research design choices, and we find no systematic evidence supporting their claim that auditors violate their independence as a result of clients purchasing relatively more nonaudit services.

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