Earnings Management: An Analysis of Opportunistic Behaviour, Monitoring Mechanism and Financial Distress

Ghazali, Aziatul Waznah; Shafie, Nur Aima; Sanusi, Zuraidah Mohd

doi:10.1016/s2212-5671(15)01100-4

Cited by 154 publications

(223 citation statements)

References 61 publications

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“…Dividend policy can also play a role as a bonding mechanism that can reduce cash flow under management control so as to reduce agency problems. Second, it provides empirical support to previous research that analyzes managerial opportunistic behavior problems (Ghazali et al, 2015). Third, it is still rare in Indonesia to examine the impact of managerial opportunistic behavior on firm value proxied with two different types of measures at the same time.…”

Section: Introductionsupporting

confidence: 61%

“…It is the behavior of managers who act in the best interests of themselves and not in the best interests of shareholders. In this study, managerial opportunistic behavior is proxied by free cash flow (FCF) which refers to previous researchers (Ghazali et al, 2015). The FCF data in this study were obtained from the Blomberg Finance Database.…”

Section: Managerial Opportunistic Behaviormentioning

confidence: 99%

See 1 more Smart Citation

Managerial opportunistic behavior and firm value: Empirical study of manufacturing companies in Indonesia

Sianturi¹,

Wahyudi²,

Pangestuti³

et al. 2020

10.5267/j.msl

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This paper aims to investigate the relationship between managerial opportunistic behavior and the value of manufacturing companies listed on the Indonesia Stock Exchange, using two different indicators of company value. The first indicator looks at the value of the company from a less than ideal size and other indicators view the value of the company from the ideal size. By using 320 observations, the results of this study found evidence that managerial opportunistic behavior that is proxied by free cash flow plays a role in influencing the overvalued equity proxied by market books. Likewise, free cash flow plays an important role on influencing Tobin q. This study also establishes an indirect relationship of free cash flow to overvalued equity and Tobin q which is mediated by dividend policy. Empirical results show that dividend policy mediates the effect of free cash flow on overvalued equity and also Tobin q partially.

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Section: Introductionsupporting

confidence: 61%

Section: Managerial Opportunistic Behaviormentioning

confidence: 99%

Managerial opportunistic behavior and firm value: Empirical study of manufacturing companies in Indonesia

Sianturi¹,

Wahyudi²,

Pangestuti³

et al. 2020

10.5267/j.msl

View full text Add to dashboard Cite

show abstract

“…Hence, independent directors who are supposed to be unbiased concerning inside interests, and the role played by female board members, or the presence of directors representing pension funds, financial institutions, or other institutional investors, can have influential consequences on the corporate governance of Latin American firms, and ultimately, in the discretionary managerial decision-making power regarding the quality of earnings. Alternatively, literature has widely supported the intuition that earnings are more actively managed in situations of financial distress (Beneish, Lee, & Nichols, 2013;Ghazali, Shafie, & Sanusi, 2015;Habib et al, 2013). Hence, another suggestion for further research is to compare the extent of real earnings management between Latin American companies designated as financially distressed and their counterparts endowed with stronger financial muscle.…”

Section: Resultsmentioning

confidence: 99%

Real earnings management and corporate governance: a study of Latin America

Mellado

Saona

2019

Economic Research-Ekonomska Istraživanja

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This article analyses the impact of ownership structure features and institutional settings on real activities manipulation. The analysis is based on a sample of listed companies in the underexplored Latin American market for the period of 2004-2016. Paneldata-based G.M.M. System Estimation is used in the empirical analysis. The results confirm that the monitoring role of the majority owner is crucial in mitigating managerial opportunistic behaviour. Here, opportunistic behaviour refers to engaging in real activities manipulation that reduces the informative content of financial statements. However, analysis of insider ownership revealed that managers had a negative impact on transparency. We observed that as insider ownership increases, managers engage more actively in real earnings management. We also find that the institutional ownership and the quality of the regulatory system proved to be effective mechanisms in reducing real activities manipulation. ARTICLE HISTORY

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“…The level of leverage is found low in pre-merger and acquisition firms which engage in upward earnings management behavior (Alsharairi & Salama, 2012). Additionally, another study also find that distressed firms are actually less possible to commit earnings management because those firms will used up all means for engaging earnings management (Ghazali, Shafie, & Sanusi, 2015). When level of debt comparatively low, the regression of debt on earnings management is found negative.…”

Section: Leverage and Earning Managementmentioning

confidence: 95%

The Effect of firm characteristics and good corporate governance characteristics to earning management behaviors

Jessica¹

2020

jafas

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This research is carried out to investigate the influence of firm characteristics and good governance characteristics to earnings management behavior. Furthermore, the research is expanded to determine the predictive discretionary accruals models in Indonesia. The author utilizing firm listed in Indonesia Stock Exchange during 2014-2018 as research object. Design/methodology/approach: The research samples is selected by utilizing the purposive sampling method. In addition, the data analyze is conducted through E-Views version 10. Three discretionary accruals models is used to define earnings management behavior. The research assumed firm characteristics factors such as financial performance, firm size, leverage, and share issuance activity and good governance characteristics such as board of directors' size and auditor's size. Findings: The research discovers that firm characteristics can accentuate the earnings management behavior significantly. In other hand, in good corporate governance characteristics only big four auditor is significant. The research also find that discretionary accruals model of Jones, Dechow, and Kothari are predictive in Indonesia. Practical implications: The discoveries of this research provide understanding for investors that enforcement on both governance and monitoring mechanism are essential approach to reduce earnings management behavior. Originality/value: The research investigated three models of discretionary accruals' capability in predicting earnings management behavior, and found out all discretionary accruals model are still relevant to be use in predictive to define earnings management behavior in Indonesia.

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Earnings Management: An Analysis of Opportunistic Behaviour, Monitoring Mechanism and Financial Distress

Cited by 154 publications

References 61 publications

Managerial opportunistic behavior and firm value: Empirical study of manufacturing companies in Indonesia

Managerial opportunistic behavior and firm value: Empirical study of manufacturing companies in Indonesia

Real earnings management and corporate governance: a study of Latin America

The Effect of firm characteristics and good corporate governance characteristics to earning management behaviors

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