Impact of Firm Size on Earnings Management: A Study of Textile Sector of Pakistan

Ali, Usman; Noor, Muhammad Afzal; Khurshid, Muhammad Kashif; Mahmood, Akhtar

doi:10.2139/ssrn.2698317

Cited by 52 publications

(60 citation statements)

References 26 publications

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“…The results of the study support agency theory which states that the larger the company, the greater information asymmetry and agency conflict faced by the company. The results of this study are in line with the research of Barton and Simko (2002) and Ali et al (2015). Their study found a positive relationship between company size and earnings management, the larger the company, the more likely management to do earnings management because large companies are under big pressure to fulfill the expectations of financial analysts.…”

Section: Discussionsupporting

confidence: 89%

“…Political costs occur high due to the profitability of the company that can attract the attention of the media and consumers. Barton and Simko (2002) and Ali et al (2015) have used agency theory to explain the relationship between firm size and earnings management. Barton and Simko (2002), Ali et al (2015), and Turegun (2016) found a positive relationship between company size and earnings management large companies tend to do earnings management because large companies are under great pressure to fulfill the expectations of financial analysts.…”

Section: Introductionmentioning

confidence: 99%

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Impact of Leverage and Firm Size on Earnings Management in Indonesia

Nalarreason

Sutrisno

Mardiati

2019

IJMMU

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This study aimed to determine the effect of leverage and firm size toward earnings management. This study used a sample of the financial report data from manufacturing companies listed on the Indonesia stock exchange for the 2013-2017 period. The data analysis testing in this study employed EViews (Econometric Views). The results showed that the best panel regression model in this study was random effect model. Consistent with agency theory and positive accounting theory, leverage and firm size has a positive effect on the earnings management for manufacturing companies in Indonesia. The empirical results showed that leverage and firm size increases provide encouragement for managers to manipulate earnings.

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Section: Discussionsupporting

confidence: 89%

Section: Introductionmentioning

confidence: 99%

Impact of Leverage and Firm Size on Earnings Management in Indonesia

Nalarreason

Sutrisno

Mardiati

2019

IJMMU

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“…Source: Authors' computation, 2018. this study. It corroborated previous conclusions in the literature, notably the study of Ali et al [33]. They found an inverse association between leverage (LEV) and earnings persistence and share price (SP) of listed manufacturing firms in Nigeria.…”

Section: Tobin's Q and Earnings Persistencesupporting

confidence: 91%

Earnings Persistence and Firm Performance: Implications of Analysts? Accurate Forecast Ability from the Emerging Market of Nigeria

Aguguom¹,

Dada²,

Nwaobia³

2019

Int J Account Res

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This paper empirically examined the potency and value relevance of earnings persistence (EPERS) and its effect on firm performance and the implications of the analysts' accurate forecast ability from the emerging market of Nigeria. The study adopted the expo facto research design and sampled 51 companies listed on the Nigerian Stock Exchange using stratified random sampling techniques from all the sectors from the 2000-2016 periods. Descriptive and Panel data regression statistics were employed in the analysis of the effect of earnings persistence on firm performance. Pre and post estimation tests were carried out: variance inflation factor (VIF) showed no evidence of multicollinearity among the variables, correlation matrix test did not revealed any multi-collinearity problem, normality test using Jarque-Bera test of normality posed no problem to the study. While Breusch-Pagan/Cook-Wesberg tests to assess the variance in the error terms (residuals) of the models, the results indicated that all the models did not suffer from heteroskedasticity. Notwithstanding, panel robust standard error (PRSR) was employed to control the heteroscedasticity. The study revealed that earnings persistence (EPERS) had a negative and no significant effect on firm performance (Tobin's Q). Leverage (LEV) exhibited a positive relationship whereas firm size (FRMSIZE) revealed a negative relationship with Tobin's Q (TQ). Also based on findings, a weak growth trend was established between EPERS and Tobin's Q. Earnings persistence resulting from discretionary and opportunistic earnings could give inaccurate forecasting ability. Consequently, the study recommended that analysts should be watchful of the stable occurrence of earnings when evaluating reported financial statements, without which, predictions made from them could have negative and misleading implications.Aguguom AT, et al. OPEN ACCESS Freely available onlineInt J Account Res, Vol. 7 Iss. 1 No: 198 quality, earnings persistence, earnings predictability and earning smoothness) and market-based earnings quality attributes (value relevance, earnings timeliness, and earnings conservatism) to investigate their effects on firm performance.

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“…This findings supports many of the existing literature like (Ajit, Malik, & Verma, 2013); (Roy, 2016). On the other hand, results advocated a momentous negative association between firm size and earnings management which is fairly in line with the current literature like (Ali, Noor, Khurshid, & Mahmood, 2015). The study moreover found the optimistic relation between firm's age and earnings management.…”

Section: Resultssupporting

confidence: 91%

“…In this position, one dominant issue that remain on the front burner is how to build up and maintained investors' confidence in the domestic economy through transparent financial reporting (Fodio, Ibikunle, & Oba, 2013). Study on earnings management is one such instrument which will enable the regulatory bodies in the country to ensure that reported accounting figures are representative 8 of true and fair picture of financial affairs of firm in particular and economy in general (Roy & Debnath, 2015a). The practice of earnings management within the firm may leave challenge before the investors (Ajay & Madhumathi, 2015).…”

Section: Introductionmentioning

confidence: 99%

Assaying the Impact of Firm's Growth and Performance on Earnings Management: An Empirical Observation of Indian Economy

2017

International Journal of Research in Business Studies and Manag

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Considering the connotation of true and fair financial disclosure practices and corporate governance mechanism in the quickly improving economic scenario, this study attempted to analyses the nature and extent of earnings management practices and also to assess the impact of firm's growth and performance on earnings management through discretionary accruals estimation in India. The study uses cross-sectional modified Jones model to estimate discretionary accruals, a proxy for earnings management. A sample of 756 firm-year observations from non-financial corporate sector (banking and other financial sector was not considered for distinct governance and reporting practices) for nine years from 2007 to 2015, was considered based on some accounting and market measurement criteria from Capitalineplus Corporate Database. The study analyzed the panel data using a fixed effect model to estimate the influence of firm's growth and performance over the discretionary accruals. The findings of the study affirmed that there is an existence of earnings management practices across the Indian nonfinancial firms under study, which followed a mixed trend. Regression analysis of the study witnessed that growth of the firm is positively associated with discretionary accruals while performance is negatively correlated. Nonetheless, among the other control variables viz; firm's size and age were also found statistically significant influencing variables.

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Impact of Firm Size on Earnings Management: A Study of Textile Sector of Pakistan

Cited by 52 publications

References 26 publications

Impact of Leverage and Firm Size on Earnings Management in Indonesia

Impact of Leverage and Firm Size on Earnings Management in Indonesia

Earnings Persistence and Firm Performance: Implications of Analysts? Accurate Forecast Ability from the Emerging Market of Nigeria

Assaying the Impact of Firm's Growth and Performance on Earnings Management: An Empirical Observation of Indian Economy

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