Global context of disparities in earnings management among enterprises: Evidence from Slovakia

Valášková, Katarína; Ďurana, Pavol

doi:10.1051/shsconf/20207401034

Cited by 10 publications

(6 citation statements)

References 32 publications

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“…Callao et al (2017) tested thirteen models of accrual earnings management; their results in a sample of companies from the Visegrad Four indicate that although the modified Jones model is the most widely used model, there are other more reliable models such as Jones (1991) or Kasznik (1999). Nevertheless, a study by Kliestik et al (2020a) and Valaskova and Durana (2020) lean towards the generally preferred modified Jones model.…”

Section: Literature Reviewmentioning

confidence: 99%

Does the life cycle affect earnings management and bankruptcy?

Ďurana

Michalkova

Přívara

et al. 2021

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112

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Research background: Deteriorating economic conditions and a negative outlook increase the pressure on financial management and the need to show high financial performance. According to Positive Accounting Theory, the growing risk of bankruptcy is associated with the phenomenon of earnings management. Bankruptcy risk and the quality of reported profits, along with other aspects of financial performance, vary throughout the company's life cycle. Nevertheless, these factors or their interactions are investigated only to a very small extent. Purpose of the article: The aim of this study is to clarify the impact of corporate life cycle and bankruptcy on earnings management, in order to describe behaviour of companies at different stages of corporate life cycle. Methods: A hierarchical mixed model with a random time and industry effect was chosen as appropriate because it allows the investigation of multilevel data that is not independent. The sample covers the financial indicators of more than 33,000 Central European companies from 2015?2019. The non-sequential Dickinson model, company age, and three models of accrual earnings management were used as proxies for the company's life cycle and quality of reported profit. Findings & value added: Earnings management and bankruptcy risk have a U-shape, indicating that financially distressed firms reduce reported accounting profit at the Introduction, Decline and, to a lesser extent, at the Growth stage. Slovak and Czech companies manipulate profits to a similar extent, Hungarian companies increase accounting profit to a greatest extent than the surveyed countries by controlling bankruptcy ? life cycle effect; however, the variability of accounting manipulations across industries has not been demonstrated. These findings imply that start-ups and declining businesses provide crooked financial statements to obtain more favourable debt covenants, and estimating discretionary accruals using life-cycle subsamples can improve the predictive power of accrual earnings management models.

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Section: Literature Reviewmentioning

confidence: 99%

Does the life cycle affect earnings management and bankruptcy?

Ďurana

Michalkova

Přívara

et al. 2021

Self Cite

112

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“…Suppose the most appropriate model has to be chosen. In that case, each model needs to be assessed following the relevant statistical measures: adjusted R squared, predicted sign of variables, the standard deviation of the variables and significance level of the model and its variables, statistical significance were tested at 5% significance level (Valaskova and Durana, 2020).…”

Section: Marketing and Management Of Innovations 2020 Issuementioning

confidence: 99%

“…total accrual in the year t long-term tangible assets in the year t operating cash flow in the year t it−1 operating cash flow in the year t-1 long-term intangible assets in the year t ∆ annual change in the value of revenues in the year t −1 return on assets in the year t-1 it  prediction error Source: developed by the authors based on (Valaskova and Durana, 2020).…”

Section: Marketing and Management Of Innovations 2020 Issuementioning

confidence: 99%

Innovations in the Company’s Earning Management: The Case for the Czech Republic and Slovakia

Klieštik

Nica

Suler

et al. 2020

MMI

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Earning management is a collection of managerial decision that results in not reporting the true short-term, value-maximizing earnings as known to management. It is focused on the changes in financial reporting to mislead the stakeholders and achieve contractual benefits. Earnings management emphasizes the manipulation of accounting choices and operating cash flows, and it is known as a practice which chooses an accounting treatment that is either opportunistic (maximizing the utility of management only) or economically efficient. The paper deals with the possibilities of detection and quantification of trend, degree and scope of the earnings management of Slovak and Czech companies from 2015 to 2017. The paper aimed to create a systematic overview of the earnings management specificities considering the enterprises’ innovation policy as the phenomenon of earnings management understood ambiguously, contradictory and without consensus. The paper is to explain various opinions of earnings management understanding and to propose methodical instrumentation for the detection and quantification of earnings management. The validity of the focus in question is multiplied by the possibility of smooth implementation in the transition countries, countries that even after almost thirty years of transformation, still show a significant degree of difference from countries with a developed market economy. In total, 29 earnings management detection models were subjected to forensic analysis. 2,155 Slovak and 4,842 Czech enterprises represented the statistical sample after the removal of extreme values. The most effective model to reveal manipulation with earnings is the Kothari model. Using the Friedman non-parametric test, trend, degree and scope of earnings management were tested. The results of the analysis showed interesting results – countries tend to manipulate earnings upwards. Detection of earnings management practices in enterprises is of vital importance provided that the real and correct data have to be presented to stakeholders and third parties to prevent any forms of financial and credit risks. Keywords earnings management, earnings management detection models, discretionary accruals.

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“…The authors state that corruption has a very strong effect on earnings management and that controlling the level of corruption in their countries can discourage managers of the companies from earnings management. Several studies dealing with the issue of earnings management and its detection have also been published by authors from Slovakia, such as [1][2][3][4][7][8][9][16][17][18][19][20].…”

Section: Literature Reviewmentioning

confidence: 99%

Detecting the manipulation of earnings in the company: triangulation of methods

Švábová

2021

SHS Web of Conf.

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Research background: Earnings management is a current topic in the world of financial management. It can be considered as a global phenomenon of today’s modern approach to the reporting of accounting information and related accounting decisions of managers, which may affect the overall results of financial statements. Many companies use earnings management as a tool to maintain stable profit growth or prevent “red numbers” from appearing in financial statements that are not beneficial to the company. Purpose of the article: Understanding what earnings management represents and why it is performed is essential for users of a company’s financial statements. However, detecting manipulation in companies is not easy, because Earnings management is successful if it is invisible. Therefore, statistical models are usually used to detect these practices. The aim of this paper is to show that the use of several methods strengthens the results obtained and is more probably to reveal possible manipulation of earnings in companies. Methods: In this study, we used triangulation of methods to detect Earnings management in companies: one of the most frequently used model in this area, Beneish model, but also the model for Slovak companies M-score SVK, which was created under the inspiration of the Beneish model and finally, the model of the company’s propensity score of manipulation. Findings & Value added: The study provides a global view of the possibilities of applying these three models to detect manipulation in the company. The idea of triangulation of methods is based on the consideration that if all the methods detect possible manipulation, it is very likely that it actually happens in the company.

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Global context of disparities in earnings management among enterprises: Evidence from Slovakia

Cited by 10 publications

References 32 publications

Does the life cycle affect earnings management and bankruptcy?

Does the life cycle affect earnings management and bankruptcy?

Innovations in the Company’s Earning Management: The Case for the Czech Republic and Slovakia

Detecting the manipulation of earnings in the company: triangulation of methods

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