The interaction between real and accrual-based earnings management: analysis based on the mandatory IFRS adoption

Sellami, Mouna

doi:10.14419/ijaes.v4i1.5721

Cited by 8 publications

(8 citation statements)

References 31 publications

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“…Das, Mishra, and Rajib (2017) studied Indian firms by measuring AEM and REM as modified by Jones (1991) and Roychowdhury (2006), respectively. The result presented the complementary relationship between AEM and REM that was consistent with the finding of Sellami (2016) who also found evidence that, after mandatory international financial reporting standards (IFRS) adoption in French, managers use REM and AEM simultaneously. There is supporting evidence from Taiwan, Indonesia, and Japanese, where researchers documented firms using AEM and REM simultaneously to meet earnings target (Chen, Huang, & Fan, 2012;Matsuura, 2008;Sanjaya & Saragih, 2012).…”

Section: Introductionsupporting

confidence: 88%

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Substitution between accruals‐based and real activities earnings management of listed Thai firms

Khunkaew

Yang

2019

J Corp Accounting Finance

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This article examines the association between accruals earnings management (AEM) and real activities earnings management (REM) based on 1,471 Thai firm observations during 2014-2017. The study follows a modified Jones model and Roychowdhury model to measure AEM and REM and extends the control variables by adding the factors of top management team characteristics. For the investigation, the study performs simultaneous equations and uses both ordinary least-squares and two-state least-square methods to test the regression model. The results demonstrate the negative relationship between AEM and REM which implies that the Thai firms listed use AEM and REM as the substitution method, and the results based on industry groups support the main findings of this study by presenting the negative association between AEM and REM as a different level. K E Y W O R D S accruals earnings management, real activities earnings management, simultaneous equations, substitution relationship

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Section: Introductionsupporting

confidence: 88%

“…Their results found a complementary relationship between AEM and REM. The findings of Sellami (2016) also demonstrate evidence of the mandatory IFRS adoption of use REM and AEM simultaneously by French managers.…”

Section: The Association Between Aem and Remmentioning

confidence: 54%

Substitution between accruals‐based and real activities earnings management of listed Thai firms

Khunkaew

Yang

2019

J Corp Accounting Finance

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“…This research examines the interaction between accrual-based earnings management and real earnings management practices as a strategy for meeting earnings targets. Prior studies have shown evidence that firms make choices between accruals and real earnings management (Alhadab & Nguyen, 2018;Baker et al, 2019;Cohen et al, 2008;Cohen & Zarowin, 2010;Sellami, 2016;Zang, 2012) , however, with the exception of Zang (2012), studies depicting the sequential nature of both earning management practices remain scarce so that further investigation of the sequential nature of both earnings managements is necessary. This research provides evidence that managers use a combination of accruals and real earnings management to meet earnings targets and shows that real and accruals earnings management have a sequential nature.…”

Section: Introductionmentioning

confidence: 99%

Is there any interaction between real earnings management and accrual-based earnings management?

Buanaputra

2021

JAAI

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This research aims to investigate whether firms employ real earnings management (REM) and accrual-based earnings management (AEM) as substitutes for each other when managing earnings to meet earnings benchmarks. It specifically looks at the sequential nature of both forms of earnings management. REM is proxied by an abnormal amount of operating cash developed by Dechow et al. (1998), while AEM is proxied by the discretionary accrual model by Dechow, Sloan, & Sweeney (1995). The data was obtained from the Economics and Business Data Center, Faculty of Economics and Business, Gadjah Mada University, focusing on manufacturing and mining companies during the period from 2005 to 2013, which resulted in 754 firm-years data. Using correlation tests and an empirical model developed by this research, which captures the interaction between REM and AEM, this research shows that firms use both forms of earnings management sequentially; managers more often engage in accrual-based earnings management if the earnings produced by real manipulations do not meet the earnings target. This finding is important as REM and AEM occur sequentially instead of simultaneously, and earnings performance is not only driven by accrual-based earnings management but also by real earnings management.

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“…Furthermore, a study of Sellami (2016) analyzed the AEM and REM of French registered firms, over a time period of 1999 to 2011. The findings of the study confirmed that companies manage income and use REM to smoothen out their incomes.…”

Section: Literature Reviewmentioning

confidence: 99%

Accrual Management in the Pakistani Non-Financial Firms: Explaining the Role of Idiosyncratic Risk and Macroeconomic Uncertainty

Rashid¹,

Ishfaque²,

Jehan³

2021

LJB

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The growing global uncertainty has pushed firms to re-assess their financial strengths, and re-examine their earning management strategies and methods. It is now common knowledge that firms face unexpected variations in several different, firm-specific, and macroeconomic factors at a time. Therefore, this research sets out to examine the role of both idiosyncratic (firm-specific) risk and macroeconomic uncertainty in earnings (discretionary accrual) management, of 400 non-financial listed firms, over the time period spanning from the year 2000-2016. In this regard, this study offers robust empirical evidence that is based on the importance of both idiosyncratic and macroeconomic uncertainties, by considering various indicators of each type of uncertainty that is taken into account. The empirical findings state that there is a negative impact of both types of uncertainties on discretionary accruals. Notably, the findings reveal that compared to the impact of idiosyncratic risk, the uncertainty associated with macroeconomic factors tends to have greater impacts on accrual management of the Pakistani firms. These findings about the earning management effects of uncertainty are useful for different stakeholders including policymakers, customers, suppliers, investors and firm managers in order to formulate appropriate strategies and device relevant policies.

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The interaction between real and accrual-based earnings management: analysis based on the mandatory IFRS adoption

Cited by 8 publications

References 31 publications

Substitution between accruals‐based and real activities earnings management of listed Thai firms

Substitution between accruals‐based and real activities earnings management of listed Thai firms

Is there any interaction between real earnings management and accrual-based earnings management?

Accrual Management in the Pakistani Non-Financial Firms: Explaining the Role of Idiosyncratic Risk and Macroeconomic Uncertainty

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