Earnings Management in Greece: A Case Study in Construction Sector Using Jones Model

Abstract

Shadow economy is harmful to the whole official economy. It distorts competition and stock prices, it worsens income distribution and is an obstacle for entrepreneurship and economic growth. There are many reasons causing shadow economy. One of them is earnings management. A lot of research has been made on earnings management. In this paper Jones (1991) model will be used to examine the phenomenon of earnings management in the Greek construction industry. The findings are: first in the Greek construction sector discretionary accruals in practice affect negligibly the percentage of shadow economy in GDP, second in the Greek construction sector discretionary accruals (showing lower profits) increase in periods of higher capital tax rate, third in the Greek construction sector usually large companies resort to earnings management more than the small ones. Hence, Jones (1991) model shows the way for further investigation on tax avoidance. It should be noted however that shadow economy is a very complicated topic and is not only a matter of just earnings management. The contribution of this paper is that it uses Jones (1991) model to spot tax evading companies and triggers further research. Besides, the findings of this paper indicate the need for the global adoption of the international accounting and auditing standards. Cultural differentials across countries, which hinder this adoption, must be overcome.

The Effect of Earning Management and Good Corporate on Tax Avoidance on Retails and Investment Companies on Indonesia Stock Exchange (BEI) in 2018

“…Earning management is measured by setting aside total accruals (TA) with non-disretionary accruals (NDA) with in Modified Jones II Model, (Setiawati & Na'im, 2000), (Kurniasih & Iskak, Corporate Governance dan Insentif Manajemen Laba, 2016), (Gasteratos, Karamalis, Koutoupis, & Filos, 2016). Earning Management formula:…”

Earnings Management in State-Owned Enterprises in a Period of Macroeconomic Instability

“…Earnings management is a process that managers use their judgment in financial reporting and in structuring transactions to alter financial reports to either mislead stakeholders about the economic performance of the company or to influence contractual outcomes which depend on reported accounting numbers (Healy & Wahlen, 1999). Earnings management has been a popular topic for research in the past two decades (e.g., Dechow & Skinner, 2000;Cheng & Warfield, 2005;Lo, 2008;Dechow, Hutton, Kim,& Sloan, 2012;Fang, Huang, & Karpoff, 2016;Gasteratos, Karamalis, Koutoupis, & Filos, 2016;Amidu & Issahaku, 2019;Beuselinck, Cascino, Deloof, & Vanstraelen, 2019;Baker, Lopez, Reitenga, & Ruch, 2019;Bzeouich, Lakhal, adopted two methods for estimating the use of earnings management techniques. The first method is the Earnings Distribution Model as proposed by Burgstahler and Dichev (1997).…”