Do Australian companies manage earnings to meet simple earnings benchmarks?

Holland, David; Ramsay, Alan Leigh

doi:10.1111/1467-629x.00082

Cited by 109 publications

(116 citation statements)

References 19 publications

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“…In line with Holland and Ramsay (2003), this study also examines the behaviour of earnings and cash flow from operation in the periods before and after the IPO year. The comparison of the level of earnings and cash flow follows Jain and Kini (1994) who use the latest year of IPO complete financial year as the benchmark in examining the performance of IPO firms.…”

Section: Methodsmentioning

confidence: 99%

“…These two variables and their derivative have been used and extensively examined in previous studies examining earnings management of earnings manipulation of the firms, in various economic setting not limited to IPO per se. Holland and Ramsay (2003) use the level and change of earnings and cash flow from operation to detect whether firms manage earnings to meet simple earnings benchmark.…”

Section: Methodsmentioning

confidence: 99%

“…In this study a difference approach is used, that is an earnings benchmark model. The spirit in doing this study comes from Holland and Ramsay (2003) who examine whether Australian firms manage earnings to meet earnings benchmark. They assert that Australian companies manage earnings to ensure reporting of positive profits and to sustain the previous year's profit performance.…”

Section: Theoretical Reviewmentioning

confidence: 99%

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Earnings and Cash Flows Behaviour in Indonesian Initial Public Offerings

Irawan¹,

Gumanti²,

Manik³

2017

EKUITAS

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Initial public offerings (IPOs) offer a fruitful area to be explored given the existence of asymmetric information among various parties interested in the IPO. One of the issues pertaining in the IPO setting is the presumed existence of earnings management practice (Teoh et al., 1998). In this case, there seems to be strong incentives of the owners of the firm to make financial performance of the firm look better in the periods before the offering. This study attempts to examine whether there is significant increase in earnings level prior to the offering to be interpreted as the existence of earnings management. The behaviour of cash flow from operation is also examined. A sample of 35 Indonesian IPOs that made public during 2002-2005 periods was examined. The t-test for mean difference was performed to test whether earnings is different. The findings show that earnings level tends to increase in the year closes to the IPO date, but decrease in the next two years after that. The behaviour of cash flows from operating activities is almost similar. However, this study is unable to state that earnings management is strongly evidenced in Indonesian IPO settings.

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Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Theoretical Reviewmentioning

confidence: 99%

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Earnings and Cash Flows Behaviour in Indonesian Initial Public Offerings

Irawan¹,

Gumanti²,

Manik³

2017

EKUITAS

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“…The occurrence of income smoothing activities attributed to managers" opportunistic behaviour has indeed intricate the standard setting process (Healy & Wahlen, 1999). Managers" incentive to exploit accrual basis accounting increases if they are bound to meet specific targets (Holland & Ramsay, 2003;Dechow et al, 1996). Wild (1996) and Dechow et al (1996) suggest that an appropriate monitoring system is essential in controlling the managerial opportunistic behaviour.…”

Section: Earnings Reliability Managerial Opportunism and Corporate Gmentioning

confidence: 99%

The Impact of Managerial Opportunism on Earnings Reliability

Chang¹

2015

IJEF

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This study is motivated by the increasing incidences of corporate failures caused by fraudulent accounting and breaches in corporate governance and ethical conducts. For example, it is expected that managers will resort to activities that are not consistent with appropriate governance and ethics just to keep up with the market expectations to safeguard their position. This study investigates the impact of five managers" opportunistic incentives on the reliability of firms" reported earnings (namely free cash flow, abnormal capital expenditure, bonus plan, distress sign and leverage), controlled by six other widely implemented standard structural governance mechanisms. The earnings reliability tests are conducted using the balanced panel data analysis specification covering 323 sample firms with continuous accounting and corporate governance data of 15 years beginning 1993. Consistent with literature, the results reveal that firms" earnings reliability is significantly related to all managerial opportunism attributes, implying the adverse effect of these incentives on the usefulness of accounting information in assessing management"s stewardship. These findings suggest the need for a better management mechanism to integrate governance and effective enforcement of control requirements to mitigate managerial opportunism and hence uphold the quality of published accounting information.

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“…Il est important de souligner que les études mettent systématiquement en évidence des irrégularités dans la distribution des résultats publiés et les interprètent comme une preuve de manipulation comptable pour éviter des seuils (Burgstahler et Dichev 1997 ;Burgstahler et Eames 2003 ;Holland et Ramsey 2003 ;Bisson et al 2004 ;Mard 2004). Les irrégularités ont été mesurées afin d'effectuer des comparaisons dans le temps -évolution- (Brown 2001), dans l'espacecomparaisons internationales- (Daske et al 2003 ;Leuz et al 2003 ;Glaum et al 2004), ou entre les différents seuils -hiérarchisation- (Degeorge et al 1999 ;Kasznik 1999 ;Brown et Caylor 2005).…”

Section: Le Postulat De Manipulation Marginaleunclassified

Gestion du résultat pour éviter de publier une perte : les montants manipulés sont-ils marginaux ?

Vidal

2010

Comptabilité Contrôle Audit

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RésuméDe nombreuses études internationales se sont intéressées aux motivations qui conduisent les entreprises à publier des résultats faiblement supérieurs à certains seuils, comme le résultat nul. Ces études se fondent sur des mesures « non paramétriques » qui présentent des limites méthodologiques. La seule hypothèse est que l'allure de la distribution est supposée lisse en absence de manipulation.Cette étude tente de déterminer une loi mathématique de distribution des résultats afin de mesurer les effectifs attendus (et donc les irrégularités) de manière « paramétrique ». Une telle approche permet (1) de mieux mesurer les irrégularités autours des seuils, (2) de mieux comparer les seuils comptables dans le temps et dans l'espace, et (3) d'évaluer les montants manipulés.Le principal résultat empirique de l'étude est de constater que, contrairement au postulat généralement admis, si les entreprises faiblement bénéficiaires en surnombre évitent de publier une perte, alors cet évitement ne concerne pas uniquement des entreprises qui auraient été faiblement déficitaires en absence de manipulation. Les motivations qui poussent les entreprises à atteindre ou dépasser un seuil comptable méritent donc une attention accrue de la part des chercheurs en comptabilité. Mots clefs 1 31Gestion du résultat, seuil comptable, loi de distribution des résultats, mesure paramétrique des irrégularités de distribution, évitement des petites pertes. EARNINGS MANAGEMENT TO AVOID LOSSES : ARE THE AMOUNTS SIGNIFICANT? AbstractThreshold studies in accounting use non-parametric methods to measure irregularities around the zero earning threshold. More precisely, the discontinuity is measured by the difference between an observed population and a theoretical population locally estimated by interpolation of adjacent intervals. The sole hypothesis is that the distribution is supposed to be smooth in the absence of earnings management.The originality of this study lies in its identification of a mathematical function for the distributions of earnings in order to measure the theoretical population in a parametric way.Such an approach allows to better measure discontinuities around thresholds, to better compare thresholds in space and over time, and to evaluate the amounts manipulated.The principal empirical result of this study is to observe that, if the irregular small profit firms avoid losses, the amounts manipulated are not necessary small. The study questions the postulate of "marginal manipulation" in earnings management to avoid thresholds.

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Do Australian companies manage earnings to meet simple earnings benchmarks?

Cited by 109 publications

References 19 publications

Earnings and Cash Flows Behaviour in Indonesian Initial Public Offerings

Earnings and Cash Flows Behaviour in Indonesian Initial Public Offerings

The Impact of Managerial Opportunism on Earnings Reliability

Gestion du résultat pour éviter de publier une perte : les montants manipulés sont-ils marginaux ?

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