Effect of Financial Performance on Earnings Management in the Drug Distribution Industry

Shirzad, Ali; Mohammadi, Shaban; Haghighi, Ryhaneh

doi:10.13106/ijidb.2015.vol6.no4.23.

Cited by 12 publications

(14 citation statements)

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“…Accounting income, the difference between revenues and expenses, represents a firm's operating performance, helps assess firm value and predicts future performance (Asgari, Salehi, & Mohammadi, 2014;Shirzad, Mohammadi, & Haghighi, 2015).…”

Section: Introductionmentioning

confidence: 99%

The Usefulness of Other Comprehensive Income for Predicting Future Earnings

Lee¹,

Lee²,

Choi³

et al. 2020

JAFEB

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This study investigates whether other comprehensive income (OCI) reported in the statement of comprehensive income (one of the main financial statements after the adoption of K-IFRS) predicts a firm's future performance. Using the quarterly data of Korean listed companies, we examine the association between OCI estimates and future earnings. First of all, we find that OCI is positively associated with earnings in both 1-and 2-quarter ahead, supporting the predictive value of OCI. When we break down OCI into its individual components, our results suggest that the net unrealized gains/losses on available-for-sale (AFS) investment securities are positively associated with future earnings, while the other components (e.g., net unrealized gains/losses on valuation of cash flow hedge derivatives) present insignificant results. In addition, we investigate whether the reliability in OCI estimates enhances the predictive value of OCI to predict future performance. We find that the predictive ability of OCI, in particular the net unrealized gains/losses on available-for-sale (AFS) investment securities, becomes more pronounced when firms are audited by the Big 4 audit firms. Overall, our study suggests that information content embedded in OCI can provide decision-useful information that is helpful for the prediction of future firm performance.

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Section: Introductionmentioning

confidence: 99%

The Usefulness of Other Comprehensive Income for Predicting Future Earnings

Lee¹,

Lee²,

Choi³

et al. 2020

JAFEB

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show abstract

“…For instance, they can promptly design the GM ingredients based on the effects of the BIS factors (i.e., risks) and the BAS factors (i.e., quality and efficacy), thereby enabling them to expedite their market share and lead the GM competition when BM patents expire. What needs to be taken into account, however, is that the ingredients are not always influential on the consumer behaviors regarding GMs, but financial support should also be provided for pharmacists to encourage the prescription of GMs (Shirzad, Mohammadi, & Haghighi, 2015;Simoens & De Coster, 2006).…”

Section: Results Summarymentioning

confidence: 99%

Consumer Behavioral Systems to Approach or Avoid Generic Medicine (GM) Consumption in Japan

Hosoda¹,

Fraser²,

Kim³

et al. 2018

JAFEB

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Generic medicine (GM), which is an alternative drug product for branded medicine (BM), is used less in Japan than in other OECD countries. Therefore, we investigate why the medical consumers of Japan avoid the use of GMs even though the efficacy and safety of the medicines have already been proven. We theorize that effectiveness or risk of GMs are related to the consumer attitude toward GMs is affected by the behavioral approach/activation system (BAS) which promotes actions to reach the desired state, and the behavioral inhibition system (BIS) which suppresses behaviors to avoid negative outcomes. To see which of the BAS and BIS dimensions are related to GM usage, we surveyed 374 Japanese consumers and found that Quality, Efficacy, Safety, & Cost-effectiveness with the BAS, and Functional Risk, Financial Risk, Social Risk, Physical Risk, Psychological Risk, & Time Risk with the BIS had a significant effect on consumer attitude to GMs. These results are important in that they 1), confirm the role of BAS/BIS in attitudes to GMs, 2), provide guidelines when marketing GMs, 3), help governments promote the use of GMs as a cost-saving measure, and 4), guide future surveys regarding consumer attitudes to GMs.

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“…Besides, hiring the auditors affiliated with the big-4 is another way to reduce profits management. This situation stays affirmed by Kao & Chen (2004), Yang, Chun, & Ramadili (2009), Herlambang & Darsono (2015), Shirzad & Haghighi (2015), Sastrawati & Hatane (2016), Lopes (2018), and Firnanti et al (2019) revealing a negative effect of this reputable auditor on profit management.…”

Section: Introductionmentioning

confidence: 89%

Institutional Ownership, External Auditor Reputation, Financial Leverage, and Earnings Management

Kutha¹,

Susan²

2021

jeb

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Profits show the performance of managers before the related parties, such as investors and creditors. Therefore, managers often incorrectly state them in the published annual financial reports to protect their reputation. Undoubtedly, this action needs to be reduced by the governance mechanism, like supervision by institutions as the owner and audit by the external public accountant firm. To control these two effects on profits management, additionally, this study employs financial leverage. This study aims to prove the impact of institutional ownership, the external auditor reputation, and financial leverage on profits management. The population and the samples are the non-financial companies establishing the LQ45 index from 2014 to 2018, getting taken by the simple random sampling technique. Also, the regression model performs as the technique to examine the data. By denoting the testing of the hypothesis results and the discussion section, this study summarizes that institutional ownership and reputable external auditor effectively decrease profits management. Additionally, although firms have much debt, they cut the tendency to manage their profits because of applying transparency.

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Effect of Financial Performance on Earnings Management in the Drug Distribution Industry

Cited by 12 publications

References 0 publications

The Usefulness of Other Comprehensive Income for Predicting Future Earnings

The Usefulness of Other Comprehensive Income for Predicting Future Earnings

Consumer Behavioral Systems to Approach or Avoid Generic Medicine (GM) Consumption in Japan

Institutional Ownership, External Auditor Reputation, Financial Leverage, and Earnings Management

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