The Effect of Earnings Management on the Value Relevance of Accounting Information

Marquardt, Carol A.; Wiedman, Christine I.

doi:10.1111/j.0306-686x.2004.00541.x

Cited by 120 publications

(101 citation statements)

References 36 publications

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“…Peasnell, Pope, and Young (2005), in their study, have examined that in England, the number of indirect managers has an inverse relationship with the possibility of abnormal accruals management to avoid decreasing losses. Marquardt and Wiedman (2004) study has shown evidence of low relevance of earnings due to earnings management and this reduction is greater for discretionary components of earnings than non-discretionary ones. Companies involved in multi activities have less earnings management (Charoenwong & Jiraporn, 2009).…”

Section: Review Of Literaturementioning

confidence: 95%

Is Earnings Management a Technique to Reduce Cost of Capital? Exploratory Study on Indian Companies

Patro¹,

Kanagaraj²

2016

JMAA

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Earnings management has attracted lots of academicians towards the research due to the emerging frauds and downfall of great corporate giants of the world. Mainly earnings measurement is based on the accounting estimates which managers can easily manipulate for their self-interest. The study investigates the relationship between cost of capital and the earnings measurement for the Indian firms. Measurement of earnings is mostly computed by taking either discretionary accruals (DAC) or non-discretionary accruals (NDAC). Present study has used Dechow, Sloan, and Sweeney (1995) model for earnings measurement and for analyzing the results. Panel data regression has also been used. Findings of the study conclude that DAC has a significant influence on cost of capital, but NDAC has no influence.

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Section: Review Of Literaturementioning

confidence: 95%

Is Earnings Management a Technique to Reduce Cost of Capital? Exploratory Study on Indian Companies

Patro¹,

Kanagaraj²

2016

JMAA

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“…They tested this claim for the period 1975-1999 and concluded that the ability of traditional financial variables to explain firm value decreased. Marquardt and Wiedman (2004) investigated the effect of earnings management on the value relevance of net income and book value in determining equity values. They observed a decline in value relevance of net income and they also found that when relevance of net income is low, book value has a greater effect in determining stock prices.…”

Section: "If Financial Information Is To Be Useful It Must Be Relevamentioning

confidence: 99%

The Impact of IFRS on the Value Relevance of Accounting Information: Evidence from Turkish Firms

Karğın¹

2013

IJEF

157

104

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Value relevance is being defined as the ability of information disclosed by financial statements to capture and summarize firm value. Value relevance can be measured through the statistical relations between information presented by financial statements and stock market values or returns. In many studies, Ohlson model (1995) has been adopted to explore relationships among the market value of equity and two main financial reporting variables, namely the book value of equity per share (represents balance sheet) and earnings per share (represents income statement). This study investigates the value relevance of accounting information in pre-and post-financial periods of International Financial Reporting Standards' (IFRS) application for Turkish listed firms from 1998 to 2011. Market value is related to book value and earnings per share by using the Ohlson model (1995). Overall book value is value relevant in determining market value or stock prices. The results show that value relevance of accounting information has improved in the post-IFRS period (2005)(2006)(2007)(2008)(2009)(2010)(2011) considering book values while improvements have not been observed in value relevance of earnings.

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“…31 company years with missing data on market value of equity, book value of equity, net profit and property-related operating lease expenses are excluded. Consistent with earlier studies (Marquardt & Wiedman, 2004;Oliveira et al, 2010), four companies with negative equity values are also excluded. In line with Rees (1997), 17 company years where the reporting period is equal to 12 months are excluded, but differences in financial reporting period-ends are ignored.…”

Section: Sample and Statisticsmentioning

confidence: 87%

The Value Relevance Of Straight-Lining Lease Expenses

Mey

2016

IBER

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The International Accounting Standards Board envisions the global acceptance of International Financial Reporting Standards (IFRS). This study exploits an occurrence in South Africa, where listed companies that previously accounted for operating leases with fixed inflationary-linked escalation clauses on an as-incurred basis, were required to straight-line those leases. Using the Ohlson (1995) valuation model this empirical study investigates the incremental value relevance of the straight-line basis over the as-incurred basis. Results show a significant change in the association between property-related operating lease expenses and market value indicators after the effect of straight-lining is introduced. This suggests that the straight-line basis provide investors with more value relevant information than when accounting for the expense as-incurred.Findings from this study prompt national accounting setters that allow for operating leases with fixed inflationary linked escalations to be accounted for on an as-incurred basis to consider first whether the straight-line basis do not provide more relevant information. Limiting the choice of accounting treatment may enhance comparability of financial statements.

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The Effect of Earnings Management on the Value Relevance of Accounting Information

Cited by 120 publications

References 36 publications

Is Earnings Management a Technique to Reduce Cost of Capital? Exploratory Study on Indian Companies

Is Earnings Management a Technique to Reduce Cost of Capital? Exploratory Study on Indian Companies

The Impact of IFRS on the Value Relevance of Accounting Information: Evidence from Turkish Firms

The Value Relevance Of Straight-Lining Lease Expenses

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