Purpose
This paper aims to examine the effect of managerial ability (MA) on real earnings management and the effect of real earnings management by higher ability managers on future profitability, at a different level of the crime rate.
Design/methodology/approach
The research sample includes 864 manufacturing firms-years listed on the Indonesian Stock Exchange. MA uses an efficiency score by data envelopment analysis. Real earnings management is measured by abnormal activities. The crime rate is measured by logarithm natural of the number of crimes per 100.000 citizens in the region where the firm is headquartered. Data analysis uses fixed-effect regression.
Findings
MA increases real earnings management in the region where the firm is headquartered with a higher crime rate while MA will reduce real earnings management in the region where the firm is headquartered with a lower crime rate. Also, real earnings management by higher-ability managers gives a signal of better future profitability in the region where the firm is headquartered with a lower crime rate.
Originality/value
This research contributes to filling the previous gap of managerial characteristics ability-related on real earnings management by providing regional crime rate as a determinant factor of managers’ ethical behavior. This research is the first one to considers the regional crime rate treatment to the relationship between MA and real earnings management especially in Indonesia. This research also provides new evidence of efficient real earnings management for a lower crime rate group of samples to give a signal of better future profitability.
AbstractDo differences in worldview ideology hinder people from objectively interpreting the effect of immigration? In an experiment with Swedish adults (n = 1015), we investigate whether people display motivated reasoning when interpreting numerical information about the effects of refugee intake on crime rate. Our results show clear evidence of motivated reasoning along the lines of worldview ideology (i.e., whether people identify themselves primarily as nationally oriented or globally oriented). In scenarios where refugee intake was associated with higher crime rate, nationally oriented people were 18 percentage points more likely to make the correct assessment compared to globally oriented people. Likewise, in scenarios where refugee intake was associated with lower crime rate, nationally oriented people were 20 percentage points less likely to make the correct assessment compared to globally oriented people. Individuals with higher numeric ability were less likely to engage in motivated reasoning, suggesting that motivated reasoning more commonly is driven by feelings and emotional cues rather than deliberate analytical processes.
The occasional “strike hard” campaigns against crime launched by the Chinese government provide an opportunity to isolate the separate effects of severity and certainty of punishment on the crime rate. The “strike hard” campaigns increase the severity of the punishment but keep the certainty of the punishment unchanged. We use provincial panel data from 1988 to 2015 to examine the impacts of the two strategies on the crime rate with pooled mean group models. The empirical results show that a significant decrease in crime rates is associated with greater certainty of detection, but greater severity has no significant effect. A 1% increase in the detection rate (a measurement of certainty) predicts about 2.7% lower crime rate. The results are robust even after considering the endogenous nature of punishment policies and controlling for the measurement error in the officially reported data.
UNEMPLOYMENT: A FACTOR IMPACTING ON CRIME RATE Summary The article presents the correlation between unemployment and crime. The main research issue in the present article is the hypothesis that unemployment is a factor determining criminal behaviour. The article presents empirical research which shows that unemployment may affect crime rate in various ways. Sometimes unemployment may lower crime rate, but there are also situations when it raises the crime rate.
Motivated reasoning when assessing the effects of refugee intake
