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Research design issues in earnings management studies
2000, Journal of Accounting and Public Policy
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Zeszyty Teoretyczne Rachunkowości, 2014
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The purpose of this research is to test investors capability to detect earning management after the period of publication, when the information from financial report plays critical role in investment’s decision. Given the feedback of investor’s reaction, this research provides an empirical model, that point out the earnings management as a message or signal of firm performance, particularly of negative perception on accruals’s opportunisties. This research uses path model analysis and multivariate regression, where the data have been collected from 2.560 observations. The unit of analysis of this research was all the listed companies in the period 20012017. The method of sampling was purposive sampling, which based on annual financial report. The findings of this research showed that all public firms have systematic method for earnings management, by distinguishing the positive and negative accruals, the discretionary accruals have the negative influence on the market value signific...
Working Papers, 2008
Based on a literature review of major accounting journals, this paper attempts to offer a comprehensive overview of recent earnings management research and provide a critical classification of articles on the matter as well as a search for voids in current literature. A ...
International Journal of Education Development, 2019
The main aim of this study is to provide an overview of earnings management. Earnings Management practices are prevalent in organizations recently and this is attributed to bad corporate governance. Accountants and Managers apply strategies that heighten earnings management in the financial reporting process by using profit eroding mechanisms which lead to drastic consequences (corporate collapse both internationally and locally as in the cases of WorldCom and Enron as well as African Petroleum Plc and Cadbury Nigeria Plc). Thus, corroding public (investors) confidence and reducing the quality of the financial reports which eventually brings adverse effects on resource allocation in the economy. Hence, investors, regulators, and academics are concerned about the continuous financial reporting abuses. This paper explored literatures on earnings management and showed the techniques used by managers to manipulate earnings in various organizations. This study suggests that a supervisory authorities be put in place by appropriately enforcing framework needed to exert compliance by firms in the preparation and presentation of financial statements. Also, the accounting profession should strengthen its ethical code so that the individual accountants and auditors will be less willing to connive and engage in the practice of earnings management.
This study purposes to provide a broad overview of current earnings management through a literature study for the 2017-2022 period. Structured Literature Review (SLR) is used to investigate how earnings management develops and focuses. This study uses keywords such as “Profit” and “Earnings Management” to identify studies that are relevant to a particular topic. A total of 27 published studies were found. This study identifies the main directions of Earnings Management research in the 2017-2022 period and discusses several important aspects of the research, namely methodology, research methods, and theory used. To enrich the results, this study defines the scope, type of industry, topics and variables used in this research. This study provides insight into future earnings management research that is used by researchers to develop Earnings Management research.
In a series of speeches to the financial community during 1998, U.S. Securities and Exchange Commission's former Chairman Arthur Levitt,declared war on "improper earnings management, big bath restructuring charges, and cookie-jar reserves". Current news about firms such as Enron has also brought attention to both how and why managers manage earnings. Accounting numbers form a fundamental part of an organization's efficient contracting technology Many of the terms, conditions, and covenants found in contracts use accounting variables, contractual arrangements and the associated contracting costs as the major determinant of accounting method choice (hence earnings management). Thus, using the propositions of contracting theory, it is possible to predict and explain accounting choices. In this paper we will provide evidence from the literature that companies have the ability to manage (manipulate) earnings using Generally Accepted Accounting Principles (GAAP). Differe...
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This research aims to determine and analyze earnings management practices by companies by using the Jones Model to calculate discretionary accruals that proxy earnings management. The research was conducted at PROPER companies listed on the Indonesia stock exchange from 2017 to 2021. This research will be a descriptive study with a quantitative approach which is a differentiator from other research that tends to conduct associative research, so this research can explore the earnings management practices carried out more intensely. The research result reveal that all PROPER companies are indicated to practice earnings management and are dominated by companies that have made environmental management efforts required following the provisions. This research can be a consideration for stakeholders in making decisions.
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The paper aims to clarify the role of earnings management in the relationship between accruals and the market value of companies. Previous studies suggest that some managers, for providing a desirable image of their performance, manage their profits through distorting cash or accruals. Consequently, investors rely on this information and estimate inaccurate stability of accruals which lead to mispricing phenomenon. Finally, the returns earned by the investors will not be equal to the expected return and thus the accrual anomaly will be created.To this aim, two hypotheses were developed and three regression models were applied to analyze the data. To analyze and estimate the models employed, the financial information of 110 companies listed on the stock exchange between years 2008 to 2014 is used. A selective approach to test the hypotheses is studying cross-sectional data.After conducting statistical tests, the results showed that discretionary accruals through which earnings manage...
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Earnings Management
Emerging Insights in Theory, Practice, and Research
- © 2008
- Joshua Ronen 0 ,
- Varda Yaari 1
Stern School of Business, New York University, New York
You can also search for this author in PubMed Google Scholar
Earl G. Graves School of Business & Management, Morgan State University, Baltimore
- Enron, WorldCom, Refco and HealthSouth revived interest in earnings management
- First book on research and earnings management
- New material after the Sarbanes-Oxley Act (SOX) of 2002
Part of the book series: Springer Series in Accounting Scholarship (KLAS, volume 3)
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Accounting-based downside risk, cost of capital, and the macroeconomy
Accounting for the middle: motivations, extent, and limitations of middle managers’ earnings management, earnings co-movements and earnings manipulation.
- accounting misreporting
- accruals management
- capital market research
- earnings management
- principal agent
Table of contents (11 chapters)
Front matter, the importance of earnings.
- Joshua Ronen, Varda Yaari
Definition of Earnings Management
The management, gatekeepers, truth-telling, maximization and minimization, the accruals process, the accruals methodology, modifications to the jones model and alternative methodologies, back matter.
From the reviews:
Authors and Affiliations
Joshua Ronen
Earl G. Graves School of Business & Management, Morgan State University, Baltimore
Varda Yaari
About the authors
Dr. Joshua Ronen, a leader in economic analysis, has more than 30 years of experience in economics, finance, accounting and research. He is Research Professor of Accounting at Stern School of Business, New York University, which he joned as a faculty member in 1973. From 1970 to 1974, he served on the faculty of the University of Chicago Business School. He received his BA in Accounting and Economics from the Hebrew University and his Ph.D. (1969) in Business Administration from Stanford University. He is also a licensed CPA in Israel and has practiced public accounting for seven years.
Dr. Ronen has served or is serving on numerous journals, including The Accounting Review, The Journal of Accounting Research, Accounting, Organizations and Society, Review of Quantitative Finance & Accounting, Journal of Accounting and Public Policy, The British Accounting Review, The Journal of International Financial Analysis. He also served as Editor-In-Chief of the Journal of Accounting, Auditing and Finance.
Dr. Varda Yaari is an Associate Professor at Morgan State University, Maryland, USA. 2002-2003: Senior Lecturer: Ben-Gurion University. 1998 – 2001: Lecturer: Ben-Gurion University. Coordinator of Accounting Area.
Dr. Yaari received his Ph.D. in Philosophy in 1989 from the Stern School of Business, NYU and his Master of Arts (Economics), 1979 from Tel-Aviv University.
Bibliographic Information
Book Title : Earnings Management
Book Subtitle : Emerging Insights in Theory, Practice, and Research
Authors : Joshua Ronen, Varda Yaari
Series Title : Springer Series in Accounting Scholarship
DOI : https://doi.org/10.1007/978-0-387-25771-6
Publisher : Springer New York, NY
eBook Packages : Business and Economics , Business and Management (R0)
Copyright Information : Springer-Verlag US 2008
Hardcover ISBN : 978-0-387-25769-3 Published: 04 December 2007
Softcover ISBN : 978-1-4419-3835-0 Published: 29 November 2010
eBook ISBN : 978-0-387-25771-6 Published: 06 August 2008
Series ISSN : 1572-0284
Edition Number : 1
Number of Pages : XX, 582
Topics : Business Strategy/Leadership , Accounting/Auditing , Finance, general , Microeconomics , Economics, general
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Research Design Issues in Earnings Management Studies
This paper discusses trade-offs associated with three research designs commonly used in the earnings management literature: those based on aggregate accruals, those based on specific accruals and those based on the distribution of earnings after management. A key theme of the paper is that empirical procedures for aggregate accruals studies lag both our theories of incentives to manage accruals and our institutional knowledge of how accruals behave. Empirical findings suggest that aggregate accruals models that do not consider long-term earnings growth are potentially misspecified and can result in misleading inferences about earnings management behavior. It is suggested that future progress in the earnings management literature is more likely to come from application of specific accrual and distribution-based tests than from aggregate accruals tests.
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IMAGES
VIDEO
COMMENTS
This paper discusses trade-offs associated with three research designs commonly used in the earnings management literature: those based on aggregate accruals, those based on specific accruals and those based on the distribution of earnings after management.
Based on a literature review of major accounting journals, this paper attempts to offer a comprehensive overview of recent earnings management research and provide a critical classification of articles on the matter as well as a search for voids in current literature. A ... International Journal of Education Development, 2019.
This study examines earnings manipulation in 87 management buyout cases during 1980–1987. Using a different research design than DeAngelo (1986), this paper shows that earnings changes for the sample … Expand
Specifically, we discuss suggestions for developing predictions about earnings management, choosing among discretionary accrual proxies, estimating discretionary accruals, addressing potential bias in the estimates, and critically evaluating the results obtained.
Specifically, we discuss suggestions for developing predictions about earnings management, choosing among discretionary accrual proxies, estimating discretionary accruals, addressing potential bias in the estimates, and critically evaluating the results obtained.
"A New Perspective on Earnings Management in Emerging European Countries: Investigation on Environmental Factors that Explain Differences in Earnings Management," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 7(2), pages 59-81.
McNichols, Maureen F., 2000. " Research design issues in earnings management studies ," Journal of Accounting and Public Policy, Elsevier, vol. 19 (4-5), pages 313-345. All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions.
Can truthful reporting be considered earnings management? What are the motivations for smoothing and other reporting strategies? How to design empirical research addressing earnings management?
This paper discusses trade-offs associated with three research designs commonly used in the earnings management literature: those based on aggregate accruals, those based on specific accruals and those based on the distribution of earnings after management.
In this commentary, we propose and discuss a set of suggestions for improving the research design of studies on earnings management that use discretionary accruals.