The Level of Conservatism in Accounting Policies and Its Effect on Earnings Management

Abed, Suzan; Albadainah, Jomana Mostafa; Serdaneh, Jamal

doi:10.5539/ijef.v4n6p78

Cited by 15 publications

(16 citation statements)

References 33 publications

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“…Lara, Osma, and Penalva (2012) found that the firms, which are more conservative have less chances of being engaged in EM. Similarly, another study by (Abed, Al-Badainah, & Serdaneh, 2012) showed that accounting conservatism and the size are inversely related to EM. While, Lobo, Parthasarathy, and Sivaramakrishnan (2008) said that the financial statements following conservative approach have more EM and show a positive relationship.…”

Section: Introductionmentioning

confidence: 99%

Earning Management and the Role of Accounting Conservatism at Firm Level

Haque¹,

Mughal²,

Zahid³

2016

IJEF

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Accounting conservatism and earning management are very much pervasive in financial reporting practices. Therefore, this research study aims to investigate the relationship between accounting conservatism and earning management by using a sample of 317 non-financial Pakistani firms consisting of 4204 firm-years over the period 1999-2013. Conservatism at the firm level is estimated by using the C-Score measure and earning management is observed by calculating discretionary accruals. The estimated results show that one fourth (86 firms) of the sample is highly conservative; out of these 76% (65 firms) showed least earning management (Earning management Q 3 ) and 29% (23 firms) showed earning management at a moderate level (Q 1

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Section: Introductionmentioning

confidence: 99%

Earning Management and the Role of Accounting Conservatism at Firm Level

Haque¹,

Mughal²,

Zahid³

2016

IJEF

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“…in such level of applying conservatism may increase the possibility of manipulation in the financial reports and will be more likely to practice earning management. Al-Zoubi (2012) and Abed et al (2012) found evidences on the existence of earning management in financial reports of Jordanian companies. In a similar vein, the World Bank and International Monetary Fund (IMF) in 2004 have evaluated the status of corporate governance in Jordan.…”

Section: Introductionmentioning

confidence: 99%

“…The low level of conservatism of Jordanian listed firms was attributed amongst others to the poor of corporate governance practices (Abed et al, 2012;Hamdan, 2012a). in such level of applying conservatism may increase the possibility of manipulation in the financial reports and will be more likely to practice earning management.…”

Section: Introductionmentioning

confidence: 99%

The Influence of Corporate Ownership Structure and Board Members’ Skills on the Accounting Conservatism: Evidence from Non-Financial Listed Firms in Amman Stock Exchange

Al-Sraheen¹,

Fadzil²,

Ismail³

2014

ijafr

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The purpose of the current study is to examine the influence of ownership structure and board members' skills in the practice of accounting conservatism of Jordanian listed firms. The data were obtained from the annual reports of 116 Jordanian listed firms for year 2011. By using the multiple regression analysis, the results show that the influence of corporate ownership structure and board skills on accounting conservatism were somewhat varied. All variables were a positive relationship with the conservatism with the exception of the board multiple ISSN 2162-3082 2014 www.macrothink.org/ijafr 178 directorship which has negative relationship with conservatism. Five hypotheses were developed and offered in this paper, institutional ownership and board financial expertise were supported, while family ownership, board tenure and board multiple directorships were not supported due to the higher level of P-value compared to 0.05. These results refer that corporate governance plays a vital role in enhancing the level of conservatism and reducing the agency conflict. Further, regulators bodies in Jordan should increase the effectiveness role of corporate governance in Jordanian companies in order to enhance the quality of financial reports. In addition, this study opens up avenues for more studies on accounting conservatism not only in Jordan, but also in other countries where this area of study is lacking. International Journal of Accounting and Financial Reporting

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“…Thus, in this study, discretionary accruals of high level function as the earning management practices' indicator. The modified Jones model has been chosen in this study for earning management measurement because many past researches have proven the accuracy and robustness of this model in the computation of discretionary accruals when compared to other available models (Guay, Kothari, & Watts, 1996;Abed, Al-Badainah, & Serdaneh, 2012).…”

Section: Tac = Net Income (Ni) -Cash Flow From Operation (Cf)mentioning

confidence: 99%

“…As suggested, corporate managers seek to earnings management practices for attaining some capital market and contractual objectives. These include evading debt covenants violation, raising their compensation share, fulfilling or going beyond the expectations of analysists and also, smoothing the reported earnings (Abed, Al-Badainah & Serdaneh, 2012;Al-Sraheen, 2016) It is common for the practices of earnings management to lead to grave corporate fraud. For instance, the subprime mortgage crisis that happened in 2007 caused grave crisis to the world economy while est ablished firms including Lehman Brothers and Merry Lynch were pushed into bankruptcy owing to the managers' practice of earnings management.…”

Section: Introductionmentioning

confidence: 99%

Does the Monitoring Mechanisms Considered as Dilemma against the Practices of Earnings Management

Al-Sraheen¹,

Saleh²

2017

IBR

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This paper mainly aims to explore the role of monitoring mechanisms in limiting the earnings management practices among service firms in Jordan. The data used in this study were from the financial annual reports of 59 ASE listed service firms in 2015. The results of multiple regression analysis demonstrate the fairly varied influence of board of directors' variables. This paper presented three hypotheses covering board independency, CEO duality and audit committee. According to the results, internal monitoring mechanisms significantly impact the level of the practices of earnings management and the reduction of the agency conflict. Additionally, the regulatory bodies in Jordan should focus more on the role of internal monitoring mechanisms in Jordanian companies in terms of effectiveness in order to improve the quality of financial reports can be improved via the assurance of high quality of earnings. Finally, this study becomes a catalyst for more research on quality of financial reports and earnings quality in Jordan and other countries where there is still lack of studies in this domain.

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The Level of Conservatism in Accounting Policies and Its Effect on Earnings Management

Cited by 15 publications

References 33 publications

Earning Management and the Role of Accounting Conservatism at Firm Level

Earning Management and the Role of Accounting Conservatism at Firm Level

The Influence of Corporate Ownership Structure and Board Members’ Skills on the Accounting Conservatism: Evidence from Non-Financial Listed Firms in Amman Stock Exchange

Does the Monitoring Mechanisms Considered as Dilemma against the Practices of Earnings Management

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