Is earnings management sensitive to discount rates?

Haga, Jesper; Ittonen, Kim; Tronnes, Per; Wong, Leon

doi:10.1016/j.acclit.2018.03.001

Cited by 12 publications

(13 citation statements)

References 46 publications

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“…Companies audited by big four audit firms have a lower propensity for EM as big four have more ability to perform audit activities and a greater ability to inhibit accounting manipulation (Haga et al, 2018). We expect a negative relationship between companies audited by big four and discretionary accruals.…”

Section: Control Variablesmentioning

confidence: 90%

“…According to Haga et al (2018), when trying to explain EM, it requires variables capable of controlling the level of indebtedness of organizations, which reflects the possibility of bankruptcy or financial difficulty. It occurs because companies experiencing financial difficulties tend to minimize EM by actual activities and maximize EM by accruals.…”

Section: Control Variablesmentioning

confidence: 99%

“…Gross domestic product (GDP) was the measure used as a macroeconomic factor, as in Haga et al (2018). According to Mota (2018), firms tend to manage accruals earnings more intensely in periods of economic recession, that is, when GDP is in the process of declining.…”

Section: Control Variablesmentioning

confidence: 99%

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Corporate Social Responsibility (CSR) and Earnings Management (EM): An Analysis from the National Culture Perspective.

Klann¹

2020

Preprint

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This research investigates the influence of national culture dimensions on the relationship between corporate social responsibility (CSR) and earnings management (EM) in order to understand whether the culture of countries influences the informational behavior of companies engaging in CSR activities. We evidenced that the social and environmental practices have a negative relation with the ones of the EM in the 19,635 companies located in the 24 countries, in an analysis without considering the influence of the national culture. By inserting Hofstede's cultural dimensions, we find that individualism, masculinity, and indulgence impact CSR and EM practices, so that companies seem to get more involved with EM and also to disclose more social and environmental practices, is in line with the opportunistic approach of CSR. On the other hand, we show that the power distance influences for a negative relationship between CSR and EM, which reveals that organizations maintain their informational behavior in this context. These results were confirmed for the total sample of 157,080 observations and also for the sample generated through the Propensity Score Matching, which matched 37,428 observations from companies that disclose CSR practices or not, considering the matching between sizes and industries. These findings may contribute to the literature by explaining the range of divergent results on CSR and EM, generating evidence that some dimensions of national culture may help to explain why, in certain scenarios, CSR has a positive relation to EM, while in others, it shows the opposite. Moreover, through this evidence, organizations, especially those with subsidiaries/affiliates in other countries, can focus on control mechanisms aimed to mitigate the opportunistic behavior of managers, triggered by the cultural influence of individualism, masculinity, and indulgence.

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Section: Control Variablesmentioning

confidence: 90%

Section: Control Variablesmentioning

confidence: 99%

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Corporate Social Responsibility (CSR) and Earnings Management (EM): An Analysis from the National Culture Perspective.

Klann¹

2020

Preprint

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“…According to Kamarudin and Wan Ismail (2014), earnings quality is “The information with a low occurrence of earnings management manipulations” (p.227). It means that when managers manage earnings for an opportunistic purpose, accounting profits lose their ability as a measure of firms’ financial performance, managers’ reputation and information value (Haga et al , 2018). Earnings manipulations hence deteriorate the quality of earnings, thereby affecting foreign and local investors’ decisions and leading to collapse of several global companies.…”

Section: Introductionmentioning

confidence: 99%

Multiple directorships and earnings quality: Does investor protection matter?

Alhadi¹,

Senik

Johari

et al. 2021

JABS

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Purpose This study aims to investigate whether higher earnings quality is related to the existence of multiple directorships among corporate boards and whether this relationship varies with the quality of investor protection. Design/methodology/approach This paper used a dynamic panel data modelling on the sample of 2,090 firm-year observations over the period from 2007 to 2016 in Malaysia. The generalized method of moments estimators were used to deal with endogeneity and other econometric problems. Findings This study finds that the accumulation of several outside directorships is negatively associated with the firm's earnings quality, as measured by the magnitude of discretionary accruals. More importantly, the findings provide evidence that multiple directors are more efficient in improving earnings quality in healthy investor protection environment. Practical implications The appointment of directors should be based on market-based and not on a relationship (i.e. financial and industry professionals). Originality/value The results highlight the importance of interaction between internal and external governance mechanisms to improve the firm's financial performance, investment and market efficiency. High-quality investor protection and law enforcement are significant for enhancing the monitoring role of multiple directorships in improving earnings quality.

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“…management manipulations" (p. 227). 1 This was further elaborated by Haga, Ittonen, Tronnes and Wong (2018), that when managers manage earnings for an opportunistic purpose, accounting profits are no longer perceived as a measure of the firm's financial performance. Since such earnings management affect the reputation of firms, there is a need to enhance the monitoring mechanisms and the accounting standards.…”

Section: Introductionmentioning

confidence: 99%

Ownership Structure and Earnings Quality Pre- and Post-IFRS: Does Investor Protection Matter?

Alhadi¹,

Senik

Johari

et al. 2020

AJBA

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Manuscript type: Research paper Research aims: This study examines whether managerial and institutional ownership is associated with higher earnings quality (EQ) after the implementation of International Financial Reporting Standards (IFRS), in comparison to the pre-IFRS period. It also examines the moderating effect of investor protection (INPT) on the link between ownership structure and EQ. Design/Methodology/Approach: This study uses a dynamic panel data modelling on a sample of 2090 firm-year observations, from 2007-2016, in Malaysia. This study applies the generalized method of moments (GMM) to deal with the econometric problems. Research findings: The results indicate that managerial ownership is essential for improving EQ before and after IFRS adoption. No

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Is earnings management sensitive to discount rates?

Cited by 12 publications

References 46 publications

Corporate Social Responsibility (CSR) and Earnings Management (EM): An Analysis from the National Culture Perspective.

Corporate Social Responsibility (CSR) and Earnings Management (EM): An Analysis from the National Culture Perspective.

Multiple directorships and earnings quality: Does investor protection matter?

Ownership Structure and Earnings Quality Pre- and Post-IFRS: Does Investor Protection Matter?

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