Real and accrual-based earnings management in the pre- and post- engagement partner signature requirement periods in the United Kingdom

Liu, Min

doi:10.1007/s11156-019-00827-2

Cited by 14 publications

(13 citation statements)

References 32 publications

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“…So far, our analysis focuses on the impact of female directors serving on audit committees on accruals-based earnings management. Instead of using financial reporting judgements, managers might also inflate their earnings using other business decisions (real earnings management), such as offering excessive price discount or lenient credits, overproduction or cutting their discretionary expenses, such as R&D (Roychowdhury 2006;Cohen et al 2008;Cohen and Zarowin 2010;Francis et al 2016;Liu 2020). Therefore, we go further and investigate whether the financial background of female members serving on the audit committees has an impact on these types of earnings management.…”

Section: Multivariate Analysismentioning

confidence: 99%

Gender diversity and earnings management: the case of female directors with financial background

Zalata

Ntim

Alsohagy

et al. 2021

Rev Quant Finan Acc

117

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Past evidence generally suggests that the presence of female directors on corporate boards tends to improve earnings quality due to these directors’ superior monitoring abilities. However, it is not clear which characteristics and skills of female directors drive such abilities. In this paper, we focus on the financial background of female directors, an area which remains largely unexplored in existing literature. The results show that the participation of female directors with relevant financial background improves earnings quality more than the participation of female directors without such background. In addition, our findings suggest that only female directors possessing relevant financial background and having fewer outside directorships are able to mitigate earnings management and therefore overcommitting expert female directors with more outside directorships would diminish their monitoring ability. We did not find any evidence suggesting that female directors without relevant financial background are able to mitigate earnings management, irrespective of their outside directorships or tenure. We interpret our findings within a theoretical framework that draws on a number of economic and social theories. The results are generally robust after controlling for potential endogeneity problems.

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Section: Multivariate Analysismentioning

confidence: 99%

Gender diversity and earnings management: the case of female directors with financial background

Zalata

Ntim

Alsohagy

et al. 2021

Rev Quant Finan Acc

117

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“…To calculate earnings comparability, first, the DAs is calculated cross-sectionally, then differences in DAs are calculated for each firm-pair in the same industry-year through the sample period 2016-2019. DAs are measured using the performance-adjusted model developed by Kothari et al (2005) to test the cross-sectional similarities of firm-pairs (Chen et al, 2020;Francis et al, 2014;Liu, 2020;Mohseni et al, 2014):…”

Section: Audit Style and Firm-pair Earnings Comparability Modelmentioning

confidence: 99%

The Moderating Effect of Firm Characteristics on the Relationship between the Audit Style and Firm-pair Earnings Comparability: An Evidence from Listed Firms on the Egyptian Stock Exchange

Saleh

2021

المجلة العلمیة للدراسات والبحوث المالیة والتجاریة

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Purpose -This research aims to study and investigate the relationship between the audit style and earnings comparability. Also, the research examines the influence of some firm-specific characteristics, as moderating variables, on this relationship. Design/Methodology -Ordinary Least-Squares (OLS) regression and multiple regressions are used to test the research hypotheses. The sample used in the current study consists of 57 non-financial firms listed on the Egyptian Stock Exchange (EGX) during 2016-2019 resulting in a final sample of 1,039 firm-pair year observations. Findings -The researcher concludes that the audit style, as measured by whether each firm-pair is audited by the same audit firm, has a significant positive effect on the earnings comparability, as measured by the differences in the discretionary accruals between firm-pairs. Besides, the positive effect of the audit style on earnings comparability has been strengthened under the presence of the firm size as a moderating variable, but it does not vary by the leverage and profitability moderating variables. These findings are robust since the results of the sensitivity analyses, using the Big 4 audit firms and the differences in the operating cash flows as alternative measures to the audit style and earnings comparability, respectively, support the results of the basic analysis. However, the results under the additional analysis indicate that all firm characteristics have a significant positive effect on the differences in the discretionary accruals which, in turn, means a negative effect on earnings comparability. Originality/value -To the best of the researcher's knowledge, there is relatively limited evidence on the comparability of earnings, as measured by the differences in discretionary accruals between firm-pairs, and its association with the audit style under the presence of firm characteristics as moderating variables. Furthermore, the findings of this research have some implications for researchers, audit firms, and regulatory bodies who seek to enhance the quality of the financial statements in emerging economies.

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“…It simply means that different and knowledgeable observers could easily reach a consensus that a particular depiction is a faithful representation (Chen et al, 2019). Timeliness: Liu (2020) posited that timeliness means having accounting information available to decisionmakers in time and at the appropriate moment to be capable of impacting their decisions. Information becomes less useful if there is a delay in reporting.…”

Section: Enhancing Qualitative Characteristicsmentioning

confidence: 99%

“…Specifically, the act of income smoothing and earnings management negates the originality of factual accounting information and has become increasingly pervasive (Kim, Lee, & Keun Yoo, 2020); It impedes credibility of financial statements (Klepáč & Hampel, 2016) negative impact on stock price as results has a negative effect on investors (Kovalova & Michalikova, 2020); it affects factual income recognition and devalues investment decisions (La Rosa, Bernini, & Verona, 2020) has the potential risk of loss of corporate reputation and could lead to undesirable and unnecessary future litigations (Lin, Li, Wang, & Yang, 2020) leads to loss of confidence (Liu, 2020); and it is an unethical resourceful tool of corporate deceit and misleading of the public, investors, shareholders, and other interested stakeholders. Consequent to a distasteful, and deceitful concealment nature of income smoothing and earnings management, and possible effects, this study is aware of possible effects, and financial scandals, the magnitude of these effects remain unknown, hence need for further investigation and extending the frontiers in literature.…”

mentioning

confidence: 99%

Income Smoothing, Earnings Management and the Credibility of Accounting Information

Ogundajo

Asaolu

Ajayi

et al. 2021

International Journal of Business, Economics and Management

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This study investigated the effect of income smoothing and earning management on the credibility of accounting information of listed manufacturing companies in Nigeria. Data used were extracted from the annual reports and accounts of the selected sixteen (16) firms for a period of 10 years (2010-2019) while content analysis was adopted in measuring accounting information credibility. Multiple linear regression analysis (OLS) method was adopted for the analysis. The result revealed that income smoothing and earnings management had statistically insignificant effect on fundamental qualitative characteristics (FQC), while income smoothing and earnings management had statistically significant effect on enhancing qualitative characteristics (EQC). However, the study obtained that income smoothing and earnings management had positive and significant effect on the credibility of accounting information of the listed manufacturing companies in Nigeria. The study opined that managers should ensure that accounting information is credible, possesses desirable accounting information qualities of relevance, and faithful representation, also verifiable, comparable, understandability, and timeliness. Contribution/Originality:This study is one of very few studies which have investigated how earnings management practices impacted on objectivity of reported financial information and breach of investors' trust in the management due to information asymmetry. INTRODUCTIONCredibility of accounting information is highly desired because it has the potency and ability to add value to investment decision made, using credible accounting information since it is reliable and dependable. The lending credibility theory suggested that the primary function of the auditors is to add value and credibility to the financial statement prepared by the management. Credibility of accounting information is a priceless and inestimable commodity that can be offered by the auditor to the public. In other words, the value of accounting information is absolutely void and insignificantly valueless if the credibility of its information contents is lacking (Jung, Soderstrom, & Yang, 2013). Credibility and reliability of accounting numbers enhance users' confidence in using the financial statements, it is capable of adding value to investment decisions and a reflection of the absence of information asymmetry, a hallmark of transparency and accountability and virtue that every audited financial

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Real and accrual-based earnings management in the pre- and post- engagement partner signature requirement periods in the United Kingdom

Cited by 14 publications

References 32 publications

Gender diversity and earnings management: the case of female directors with financial background

Gender diversity and earnings management: the case of female directors with financial background

The Moderating Effect of Firm Characteristics on the Relationship between the Audit Style and Firm-pair Earnings Comparability: An Evidence from Listed Firms on the Egyptian Stock Exchange

Income Smoothing, Earnings Management and the Credibility of Accounting Information

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