Browsing by Subject "Real earnings management"

Now showing 1 - 4 of 4
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    Corporate social responsibilitiy and earnings quality in the context of changing regulatory regimes and the financial crisis corporate
    (Universidad de Murcia, Servicio de Publicaciones, 2023) Cao, Zhangfan; Rees, William; Rodionova, Tatiana
    The objective of this paper is to examine the relationship between corporate social responsibility (CSR) and earnings management in the context of changing regulatory regimes and the financial crisis. Using a sample of 18,472 U.S. firm-year observations that represents more than 2,500 individual firms over the period of 1993 to 2018, we employ several panel-data regression models and find that firms with higher CSR engagement have higher discretionary accruals before the Sarbanes Oxley Act of 2002 (SOX) and lower thereafter. Moreover, the relationship between CSR and discretionary accruals is moderated by the managerial equity incentives. Firms practicing CSR with low incentive alignment are more likely to have high discretionary accruals and receive more regulatory scrutiny from SOX. In contrast, we find high-CSR firms engage less in costly real earnings management in both pre- and post-SOX periods. Using the 2008- 2009 financial crisis as an external shock via the difference-in-difference method (DiD), our results show that high-CSR firms engage less in earnings management during the financial crisis. The implications of our findings suggest that when facing the trade-off between different types of earnings management, high- CSR firms tend to engage in less costly earnings management. Our study contributes to the burgeoning literature on the influence of CSR on financial reporting practices by examining the relationship under various contexts and highlighting the importance of the recent regulatory framework for financial reporting quality.
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    Do Industry Specialist Audit Firms Influence Real Earnings Management? The Role of Auditor Independence
    (Universidad de Murcia, Servicio de Publicaciones, 2023) Al-Qadasi, Adel Ali; Baatwah, Saeed Rabea; Ghaleb, Belal Ali; Qasem, Ameen
    In this study, we provide empirical evidence on how the relationship between industry specialist auditors and real earnings management (REM) is moderated by the auditors’ independence. From a sample of Malaysian listed companies for the period 2009 to 2016, the results indicate that companies with specialist auditors are less likely to practise REM. However, this negative association is less pronounced when the independence of the specialist auditor is low, suggesting that the presence of economic bonding between the specialist auditor and the client may allow the auditor to become sufficiently lax to align with the interests of an economically important auditee. Our findings remain robust after controlling for endogeneity and self-selection bias and performing several further analyses. This study is the first to prove that auditor independence can moderate the effectiveness of industry specialist auditors in mitigating REM practices. The results have implications for policy makers to enhance the current regulation structure of auditing and accounting professions. The results also provide new insights into the association between audit quality, REM and auditor independence in an emerging economy.
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    Open Access
    Financial reporting incentives, earnings management, and tax avoidance in SMEs
    (2020) Sánchez Ballesta, Juan Pedro; Yagüe, José; Organización de Empresas y Finanzas; Facultades, Departamentos, Servicios y Escuelas::Departamentos de la UMU::Organización de Empresas y Finanzas
    This paper examines earnings management and tax aggres siveness in SMEs. First, we find a discontinuity around zero in the distribution of earnings but not in the distribution of earnings change, and provide evidence that SMEs engage in accrual and real earnings management to beat zero earn ings, to achieve a stable net income over the years, and also when in situations of financial constraints. We also find an overall negative association between income-increasing earnings management and non-conforming tax avoidance. In addition, we show that SMEs are less tax aggressive in those settings where we have previously found that they engage in upward earnings management (i.e., small profits, smoothed net income, financial constraints). This suggests that under financial reporting incentives to report higher earnings, upward earnings management clearly prevail over tax aggressiveness. On the contrary, in settings without the pressure to report higher earnings, our findings suggest that SMEs may simultaneously engage in conforming and non conforming tax avoidance to reduce taxes paid
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    The influence of leverage on accrual-based and real earnings management : Eevidence from the UK
    (Universidad de Murcia, Servicio de Publicaciones, 2024) Al-Shattarat, Basiem
    El objetivo crucial de este estudio es observar la asociación entre el apalancamiento y la gestión de beneficios mediante prácticas de gestión de beneficios basadas en el devengo (AEM) y gestión de beneficios reales (REM) entre las empresas que cotizan en la Bolsa de Londres. Para mantener bajo control los elementos no observables, este estudio emplea un enfoque de mínimos cuadrados en dos etapas para analizar los datos de las empresas que cotizan en el Reino Unido durante los años 2009-2020. Los resultados revelan que existe una asociación negativa significativa entre el apalancamiento y la gestión de beneficios a través de REM, pero no a través de AEM. Los resultados concuerdan con la premisa de que el apalancamiento contribuye a limitar las actividades de REM, lo que a la larga influye en la calidad de los beneficios contables. Por lo tanto, un apalancamiento elevado exige el reembolso de la deuda para minimizar el efectivo disponible para gastos no óptimos de la dirección, en función de las limitaciones de gasto inducidas por el prestamista. Además, se predice que esto minimiza los comportamientos oportunistas de los directivos y fomenta su conservadurismo. Las conclusiones del estudio tienen implicaciones para los agentes reguladores y bursátiles, ya que proporciona información en profundidad sobre las prácticas actuales en materia de contabilidad y presentación de informes.