The bright side of investor sentiment: evidence from real activities manipulation

Si, Yi; Xia, Chongwu; Yang, Endong

doi:10.1080/16081625.2019.1673186

Cited by 2 publications

(2 citation statements)

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“…According to the debt covenant hypothesis, violations thereof are expensive and therefore it is in the interest of the managers to make choices so as to avoid default by violations (Watts & Zimmerman, 1986). There exists a nonlinear relationship between debt ratio and EM, (Si, 2019) found that when total debt ratio and the total financial debt ratio exceed 57.14% and 33.33%, respectively, the debt structure investigates manager to trigger earnings, via EM at high pace. Even franchise restaurants with high financial leverage are also involved in EM (Gim, Choi, & Jang, 2019).…”

Section: Debt Covenant Restrictions and Earning Management Practicesmentioning

confidence: 99%

“…Further, a relative study can also be conducted to see how IFRS moderates the relationship of earning management and financial decisions in developed and developing countries. One of the important study that needs to be done in Pakistan is to see how high investors sentiments influence REM which recently been found inverse association between both by (Si, 2019).…”

Section: Future Directionsmentioning

confidence: 99%

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An Inquiry into Earning Management Motives: Evidence from Pakistani Distressed and Non-Distressed Firms

Aman

Jan

Ullah

et al. 2019

NRJSS

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This research takes in view the motives that drive opportunistic managers in the Pakistani corporate world to manipulate firm earnings in different financial circumstances by resorting to real (REM) and accrual (AEM) earning management to reap their self-interests. The present study undertakes 188 distressed and 37 non-distressed firms for the sample period of 2010-2017. The summary stats confirm that both in distressed and non-distressed firms’ managers resort to REM practices more than AEM. The factors that urge mangers to take REM practices in distressed firms i.e., debt covenant restriction, managerial ownership and tax avoidance needs to be amended in such a way that it demotivates managers for carrying such practices in distressed firms. The factors that influence AEM practices in distressed firms are debt covenant restrictions, institutional ownership, highly valued firms and managerial ownership whereas in non-distressed firm these factors are debt covenant and effective tax rate. In non-distressed firms motives that urge mangers to adopt REM, practices are raising additional capital and tax avoidance practices.

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Section: Debt Covenant Restrictions and Earning Management Practicesmentioning

confidence: 99%

Section: Future Directionsmentioning

confidence: 99%

An Inquiry into Earning Management Motives: Evidence from Pakistani Distressed and Non-Distressed Firms

Aman

Jan

Ullah

et al. 2019

NRJSS

View full text Add to dashboard Cite

show abstract

Earnings management, investor sentiment and short-termism

Formiga Miranda,

Machado

2024

JAAR

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PurposeThis study examines the investment horizon influence, mediated by market optimism, on earnings management based on accruals and real activities. Based on short-termism, the authors argue that earnings management increases in optimistic periods to boost corporate profits.Design/methodology/approachThe authors analyzed non-financial Brazilian publicly traded firms from 2010 to 2020 by estimating industry-fixed effects of groups of short- and long-horizon firms to compare their behavior on earnings management practices during bullish moments. For robustness, the authors used alternate measures and trade-off analyses between earning management practices.FindingsThe findings indicate that, during bullish moments, companies prioritize managing their earnings through real activities management (RAM) rather than accruals earnings management (AEM), depending on their time horizon. The results demonstrate the trade-off between earnings management practices.Research limitations/implicationsThis study presents limitations when using proxies for earnings management and investor sentiment.Practical implicationsInvestors and regulators should closely monitor companies' operations, especially during bullish market conditions to prevent fraud.Originality/valueThe study addresses investor sentiment mediation in the earnings management discussion, introducing the short-termism approach.

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The bright side of investor sentiment: evidence from real activities manipulation

Cited by 2 publications

References 65 publications

An Inquiry into Earning Management Motives: Evidence from Pakistani Distressed and Non-Distressed Firms

An Inquiry into Earning Management Motives: Evidence from Pakistani Distressed and Non-Distressed Firms

Earnings management, investor sentiment and short-termism

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