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This study provides evidence on how dividend policy affects earnings management. Our goal is to contribute to the literature by employing data from a sector (aerospace and defence) that to the best of our knowledge has never been studied before in terms of the relationship between earnings management and dividend policy. Our sample consists of 17 listed companies in the U.S. Stock Exchanges, examined for the 2012-2019 period. We employ panel data linear regression to conclude that the dividend policy positively affects the management's practice of discretionary accruals manipulation. Consequently, our results support the signalling hypothesis that points to the importance of a stable dividend policy. Specifically, we provide relevant and robust information on management decision making regarding value return to the shareholders of U.S. aerospace and defence companies. Finally, we provide future research proposals that may shed more light on this obscure relationship. [ABSTRACT FROM AUTHOR]

The objective of the study is to apprehend and explore the emerging themes in the existing literature about the 'Corporate Social Responsibility disclosures (CSR)' and 'Earnings Management (EM)' relationship. It employs a combination of bibliographic techniques such as author, country, keyword, cluster, citation analysis and bibliographic coupling on the data captured from Scopus and Web of Science indexed journals. CSR and EM are niche research field since 2014, where the non-western researchers are dominating. The major keywords are corporate governance, discretionary accruals, CSR and real earnings management. Most of the studies are non-collaborative in nature. The study identified three major clusters which focus on three different aspects of the relationship between CSR and EM. These aspects are: reducing information asymmetry, meeting stakeholders' expectations and role of corporate governance and other institutional factors. The study visualizes the past, present, and future of research for CSR disclosures and EM by re-examining, unfolding and summarizing the overall knowledge, knowledge gaps, progress and mapping of the themes emerging from past studies. Therefore, the study provides a one-stop overview on the topic to interested researchers and other stakeholders such as regulators and corporate practitioners. [ABSTRACT FROM AUTHOR]

This study focuses on the effect of audit committee characteristics on earnings management among Listed Firms in Nigeria with aim to ascertain whether audit committee characteristics has effect on earnings management. Audit committee in an organization is to support firm’s governance and oversight functions with the regard to financial reporting, risk management system internal control structure, ethical accountability and internal and external audit functions. Earnings management is an attempt by managers to alter financial information either for their private gain or for the gain of stockholders. The study population was 190 firms listed in the Nigerian Stock Market. The study sample was 150 firms because 40 firms could not provide the needed data for the study as at 2014 to 2019. The study data was generated from the Thomson Reuters Data stream and other variables were handpicked from the firm’s annual reports covering the period of 2014–2019. A Generalized Least Square (GLS) estimator was used in estimating the parameters. The study provides positive and significant relationship between Audit Committee Independence (ACIND), Audit Committee Meetings (ACMT) and Earnings Management of listed Nigerian Firms in Nigeria. However, negative relationship between Audit Committee Size, Audit Committee Financial Expertise, Firm Size and Earnings Management was reported among the Listed Firms in Nigeria. Policy maker should provide policy on the composition of Audit for the committee members to clearly spelt out to enable members perform their functions effectively. Further study should look at diversity of audit committee, ethnicity, and religious influence because of the Nigerian diversity on ethnicity and religion. [ABSTRACT FROM AUTHOR]

This study investigates the relationship between capital structure and earnings management while using size as a moderator. Annual data for seventeen years (from 2004-2020) for ninety-seven companies listed in Egyptian stock market is obtained for the purpose of the study. Total debt, long term debt, and shortterm debt are used as measure of capital structure while discretionary accruals were used to measure earnings management. Jones Model was used for calculation of discretionary accruals. Data were checked using correlation analysis, panel data analysis regression to test fixed and random effect and Hausman test was used to select best model. The results indicate a significant impact of capital structure on earning management. While there was positive relationship between size and earning management and negative relationship between size and capital structure. Thus, we concluded that firms with a debt-based capital structure have creditors that act as a watchdog over its earnings management practices; however, the results were statistically significant when controlling for firm size. [ABSTRACT FROM AUTHOR]

The research on the quality of data from financial reports and its economic role has arguably come to the fore over the past decades. This is because the quality of the accounting data determines the relationship that the parties involved want to establish with the enterprise. The quality of financial reporting is examined in the literature using different methods, however, there is still no consensus on how effectively these models detect and measure earnings management. Most researchers use methods that are based on delimitations that try to break the entire demarcation into discretionary and non-discretionary components. Out of the 49 models revealed, 7 models were selected for which the necessary variable was available and suitable for the detection of earnings management. Based on relevance tests, out of the 7 models, the Kasznik-model (1999) appeared to be the most suitable for detecting earnings management in the 57 U.S. listed companies included in the study. The estimated results showed that each of the businesses included in the study had some impact on their income. In view of this, continuous attention should be paid to the issue of earnings management in order to reveal distorted information, various earnings management techniques that influence the data that form the basis of the short and long-term decisions of stakeholders. [ABSTRACT FROM AUTHOR]

This study looks at the effect which corporate governance may have on financial reporting quality using data from Nigerian publicly traded companies. The financial records of the selected companies were relied on in extracting panel data for ten (10) firms over a ten-year period (2011-2020). Board size, the expertise of board members, presence of women on companies' boards, board independence, and board shareholdings are all factors considered as measures of corporate governance. The OLS regression estimation technique was used in conjunction with relevant diagnostic tests to conduct the analysis. We found that, at a 5% significance level, the sizes of corporate boards, their level of independence and expertise, and the percentage of board shareholdings all have significant impact on financial reporting quality. Conversely, women presence in companies' Boards did not show significant effect on financial reporting quality. The study recommends, among other things, that regulatory authorities keep a close eye on directors' shareholdings over time, as this research has shown that firms with large directors' shareholdings are most likely to have the inducement to engage in earnings management, which has a multiplier effect on the quality of financial reporting. [ABSTRACT FROM AUTHOR]

This study analyzed whether Brazilian companies use earnings management (EM) practices for accruals and for real activities with greater intensity in the year they go public, based on the premise that in that year companies seek to present a more economically favorable scenario interested parties in order to attract investors. This analysis was performed by means of linear regression with robust standard errors and fixed effect control of year and sector, in 1,782 company-years, during the period from 2010 to 2018. The results showed that there is no statistically significant relationship between the EM by accruals and real activities (aggregate measure) and the year in which companies launch their Initial Public Offering (IPO, from English Initial Public Offering). When analyzing the measure of real activities by Roychowdhury (2006) by its isolated metrics, it was identified that the abnormal cash flow from the activities is related, at the level of 10%, to the year of IPO, which generates statistically sensitive evidence of that companies can use this way of manipulating values in this specific period. Finally, based on the premise that in the year of going public, companies aim to disclose inflated profits, the discretionary accruals proxy was analyzed, separating them into positive and negative accruals, which revealed that positive accruals (used to increase profit) were not related to the IPO year. This research contributes, therefore, by generating evidence on the quality of the accounting information of companies in the year in which they begin their public offerings, bringing empirical results that can assist stakeholders in their decision-making, as well as in the inspection by the regulatory bodies. [ABSTRACT FROM AUTHOR]

This paper attempts to analyze the impact of some Algerian companies’ characteristics (size, activity sector, property, listing, and nature of financial statements) on the level of earnings management. The research employed 117 observations for 26 Algerian companies from 2016 to 2020 and used a multiple linear regression model and discretionary accounting accruals to measure earnings management. According to the findings, earnings management in Algeria is explained by the companies’ sizes, activity sectors, and stock market listing. However, the nature of financial statements and the ownership of the companies do not affect earnings management. These results are beneficial for regulators and auditors since they provide empirical evidence about the characteristics of companies that manipulate earnings. Consequently, they can enable them to take appropriate actions to enhance the quality of financial reports, whether when developing and reviewing accounting standards by regulators or when examining financial information by auditors. [ABSTRACT FROM AUTHOR]

In this study we evaluated the influence of audit mechanisms on earnings management based on a sample of 142 non-financial firms listed in the 'Differentiated Corporate Governance' segment of the Brazilian stock market (B3) between 2011 and 2017. A descriptive analysis of the adopted metrics of earnings management (discretionary accruals, abnormal real activities, abnormal earnings) suggests that accounting information quality is most severely impacted by discretionary accruals. Multiple regressions on panel data using the quantile regression method revealed that audit mechanisms are protective of accounting information quality and that the existence of internal control and audit bodies--commonly regarded as internal mechanisms of corporate governance--was insufficient to inhibit the adoption of earnings management strategies, such as classification shifting, for the sample and period analyzed. [ABSTRACT FROM AUTHOR]

Research background: An initial public offering (IPO) creates an excellent opportunity to research the impact of changes in the institutional environment of companies on the trustworthiness of the information disclosed in financial statements. Purpose of the article: The main aim of the study is to analyze the use of accrual and real earnings management to inflate earnings, revenue, or total assets around the going public event. Therefore, this paper contributes to the stream of study on the quality of financial reporting of new stock companies. Methods: Two main approaches reflect the use of various types of earnings management activities, i.e., discretionary accruals and real earnings management. In both cases, it was necessary to use proper OLS method estimated models to identify the normal level of categories that affect the results reported in financial statements. Findings & value added: Based on a sample of 183 IPOs from the Warsaw Stock Exchange between 2005 and 2015, generally, managers of newly-listed companies actively use discretionary accruals, reduce production costs and certain discretionary expenses, and abnormal cash flows from operations - i.e., all proxies of earnings management used in the paper - in the periods around the IPO. In the period prior to the IPO, managers more often introduce techniques typical of the real sphere of the company's operations, in particular, the deliberate modeling of certain discretionary costs. In turn, the use of discretionary accruals dominates in the year after the IPO. [ABSTRACT FROM AUTHOR]

We examine whether Chinese firms with better voluntary corporate social responsibility (CSR) disclosure and CSR performance engage in earnings management in their financial reporting. Our results show that Chinese firms with better voluntary CSR disclosure are more likely to engage in earnings management through discretionary accruals and less likely to engage in earnings management through real activities manipulation, while Chinese firms with better CSR performance are more likely to engage in earnings management through real activities manipulation and are less likely to engage in earnings management through discretionary accruals. Our evidence shows that consistent with opportunistic theory, the Chinese firms' engagement in CSR practices is based on opportunistic incentives, and voluntary CSR disclosure and CSR performance are being used by these firms as window-dressing tools for earnings management that infringes on the benefits of firm stakeholders. [ABSTRACT FROM AUTHOR]

This paper empirically examines the linkage between ownership pattern, board composition and earnings management of Indian firms using the system Generalized Methods of Moments (GMM) by considering panel data 364 non-financial firms from 2017 to 2019, comprising of 1092 firm-year observations. The study also uses Pooled OLS and Fixed Effects model to compare the results with the system GMM in examining board composition–earnings management relation. The study reveals that board independence and diligence of independent directors do not play any role in curbing earnings management. Also, busy independent directors and persons with multiple directorships are not necessarily useful in arresting earnings management. However, earnings management practice is more prevalent in firms where the same person enjoys the power of a CEO as well as chairman. An increase in promoters' shareholding also leads to an increase in earnings management. While earnings management is not influenced by FII shareholding, it increases with the increase in DII shareholding. This study is important for several reasons. First, since this study considers the period after the implementation of a new financial reporting system in India (popularly known as IND-AS), the findings of this study reflect the earnings management behavior of Indian firms in light of new financial reporting practices. Second, the study considers the period when significant governance initiatives are taken after the implementation of the New Companies Act, 2013. This study contributes to the literature by addressing the recent governance norms and aligning the relevant policy implications accordingly. The findings of this study reveal a clear understanding as to which board level and governance parameters are useful in constraining earnings management and disclosing quality earnings by companies in an emerging market context. The outcomes are also explained further for relevant policy implications. Board of directors, managers, investors, regulators, and policymakers can find these outcomes useful for making critical governance-related decisions. Finally, the study contributes to the existing literature by providing evidence on what board level and governance parameters are useful in constraining firms' earnings management in an emerging economy under the regime of new financial reporting practices. [ABSTRACT FROM AUTHOR]

In this study, it was examined the quality of accruals and accrual based earnings management practices of BIST companies between 2005 and 2016. Accruals quality was estimated using Dechow and Dichev (2002) and McNichols (2002) models, and the discretionary accruals as an indicator of earnings management were estimated using the accruals model proposed by Kothari et al. (2005). The results of analysis showed that accruals quality and therefore earnings quality is generally low and the magnitude of absolute discretionary accruals is high for BIST companies. [ABSTRACT FROM AUTHOR]

Purpose: The aim of this study was to analyze the relevance of profits in determining the market value of publicly traded companies in Brazil considering the effects of earnings management via discretionary accruals. Methodology: The research sample was composed of 211 different non-financial companies from [B]³ between 2013 and 2018. The data were analyzed initially from regressions with panel data and, additionally, as a measure of sensitivity analysis, through regressions estimated by minimum absolute deviations. Results: Unlike what was expected a priori in the survey, it was noticed that the economic results reported by companies, when segregated from the earnings management proxy, showed less informational power in predicting companies' market value than economic results in their entirety. This outcome is apparently in line with some recent national surveys (Martins, Paulo & Monte, 2016; Marçal & Macedo, 2019) that highlight the non-opportunistic aspect of earnings management, and there may be signs of a nuance of the Brazilian market in contemporaneity in this regard. Contributions of the Study: The results contribute in a practical way by making available to external users the effects of earnings management in the evaluation process of companies (specifically by demystifying the unanimous view of intent on the part of managers in the earnings management process). Nevertheless, a theoretical gap similar to that reported by Martins et al. (2016) is now partially supplied with these new findings. [ABSTRACT FROM AUTHOR]

Earning management is a collection of managerial decision that results in not reporting the true shortterm, value-maximizing earnings as known to management. It is focused on the changes in financial reporting to mislead the stakeholders and achieve contractual benefits. Earnings management emphasizes the manipulation of accounting choices and operating cash flows, and it is known as a practice which chooses an accounting treatment that is either opportunistic (maximizing the utility of management only) or economically efficient. The paper deals with the possibilities of detection and quantification of trend, degree and scope of the earnings management of Slovak and Czech companies from 2015 to 2017. The paper aimed to create a systematic overview of the earnings management specificities considering the enterprises' innovation policy as the phenomenon of earnings management understood ambiguously, contradictory and without consensus. The paper is to explain various opinions of earnings management understanding and to propose methodical instrumentation for the detection and quantification of earnings management. The validity of the focus in question is multiplied by the possibility of smooth implementation in the transition countries, countries that even after almost thirty years of transformation, still show a significant degree of difference from countries with a developed market economy. In total, 29 earnings management detection models were subjected to forensic analysis. 2,155 Slovak and 4,842 Czech enterprises represented the statistical sample after the removal of extreme values. The most effective model to reveal manipulation with earnings is the Kothari model. Using the Friedman non-parametric test, trend, degree and scope of earnings management were tested. The results of the analysis showed interesting results - countries tend to manipulate earnings upwards. Detection of earnings management practices in enterprises is of vital importance provided that the real and correct data have to be presented to stakeholders and third parties to prevent any forms of financial and credit risks. [ABSTRACT FROM AUTHOR]

The study aims to analyze the influence of corporate governance (CG) in choosing the type of earnings management (GR). The sample comprised 179 Brazilian publicly traded companies, active in 2014 and that had sufficient data, disregarding companies belonging to the financial and insurance sector, for presenting different characteristics from the other companies that compose the sample. The period investigated was from 2014 to 2018, with data collected from the Thompson One Banker® data base, analyzed using descriptive statistics, multiple linear regression and logit regression. The results indicate that the CG is negatively related to the GR by real activities, not being found a significant relation of this with the GR by accruals. The robustness test showed a positive relationship between CG and environments with low GR for real activities and high GR for accruals. This study contributes to the literature and regulatory agencies by indicating that certain CG mechanisms can mitigate GR by actual activities, but do not have the same power in relation to GR by accounting choices. [ABSTRACT FROM AUTHOR]

This research analyzes whether there is a temporal association between investor sentiment and earnings management in Brazil. Several studies have investigated the determinants of earnings management, such as factors inside or external to companies and regulatory requirements, but few have considered personal factors, such as investor sentiment in Brazil. With this investigation, it was apparent from the findings that accruals quality is affected by investor sentiment. For participants in the Brazilian capital market, this research reinforces the need for a more careful analysis of the results reported by companies, since managers, in response to investor sentiment, may manage earnings to inflate accounting profit through accruals and influence the market’s ability to price shares correctly. It is evident that accounting choices are much more than just financial decisions and are subject to investor sentiments. The effect of investor sentiment should be considered among the determinants of future earnings management. A sample of non-financial Brazilian companies that traded shares on the Brasil, Bolsa, Balcão (B3) exchange from 2010 to 2016 was used. The investor sentiment index was calculated according to the methodology of Baker and Wurgler (2007). For earnings management, the models of Kang and Sivaramakrishnan (1995), Kothari, Leone, and Wasley (2005), and Dechow, Hutton, Kim, and Sloan (2012) were used. The estimates were carried out through regressions for pooled panel data, fixed, and dynamic effects using the system generalized method of moments (GMM) estimator. Discretionary accruals are positively associated with investor sentiment in the Brazilian capital market, in a similar way to markets with greater informational efficiency and notwithstanding the code-law system. Analyzing low and high sentiment periods separately, the findings suggest that managers increase accruals after high sentiment and reduce them after low sentiment. [ABSTRACT FROM AUTHOR]

This study objective to analyze the influence of CEO's compensation on earnings management in Brazilian banking companies. We analyzed 17 banking companies that traded shares in B3 between 2010 and 2018. Data were analyzed using descriptive statistics and multivariate analysis using quantile regression. The results show that there was no difference in earnings management levels and executive compensation over the years, even in periods of economic recession (2015 and 2016). Moreover, evidence shows that companies with the highest levels of earnings management are sensitive to reduced manipulation practices through discretionary accruals when executive compensation is increased. [ABSTRACT FROM AUTHOR]

The discussions about whether the manner of application of mandatory rotation affects the audit quality still continue in developing countries and EU countries, notably the USA. Therefore, we investigate whether Mandatory Audit Firm Rotation (MROT) enhances audit quality in Turkey for the years 2010-2016. The findings show that companies audited by mandatorily rotated new auditors have less discretionary accruals and thus higher audit quality than those non-rotated audit firms (NROT). In addition, we find that the audit quality in companies that are subjected to the mandatory rotation is higher than the audit quality of the same companies one year ago under old audit firms. Thus, our findings support the idea that mandatory audit firm rotation enhances audit quality. [ABSTRACT FROM AUTHOR]

The difference between cash flow and net profit is called accrual. This measure is divided into a discretionary portion, a proxy for earnings management, and another non-discretionary, natural of the operational activities. The implementation of international accounting standards (IFRS) changed the potential volume of the discretionary portion. From it is expected a loss in the profits persistence given its arbitrary character. Therefore, this study analyzed the impact of discretionary accruals on the profits persistence of B3 companies, considering the adoption of IFRS. Given an estimation with panel data of 100 different companies, there are indications contrary to the logic of deterioration of persistence by discretionary accruals. The explanation lies in nonopportunistic earnings management, which assists investors in decision-making. In addition, the adoption of IFRS does not imply a reflection on the relation between discretionary accumulations and the profits persistence, differently from that expected in previous studies. [ABSTRACT FROM AUTHOR]

The purpose of this study was to identify whether credit unions in Brazil use the loan loss provisions as a mechanism for earnings management. Defining the discretion in the constitution of the provisions as the recognized portion above the regulatory limit, the tests performed through panel data, with quarterly information from 2013 to 2017 of the 500 largest credit unions revealed a positive and statistically relevant association between the change in the loan loss provisions discretionary and adjusted net income - before recognition of this discretionary portion. These results confirmed the hypothesis of research that these entities used discretion in the constitution as a mechanism of earnings management, in special income smoothing, that is, in moments of more relevant results the cooperatives create a kind of provision mattress, to be reversed in periods of worse performance. These results contribute to the advancement of the literature on earnings management in financial institutions in general, and provide a relevant gap in addressing a type of entity, credit cooperatives, for which the studies are incipient. [ABSTRACT FROM AUTHOR]

This study objective to identify the effects of discretionary accruals and hedge transactions on the value of Brazilian companies, as measured by proxy Tobin's Q. Thus, research was conducted a descriptive methodology, with approach quantitative and documentary analysis. The sample comprised 234 Brazilian non-financial companies at the period of 2011 to 2013. Then, Statistical techniques such as regression of panel data were used for the analysis. The findings confirm the literature that the accruals are negatively related to the value of the companies and the hedge transactions are positively related to the value of the companies in the Brazilian scenario. Therefore it has been observed that the opportunist behavior of the managers with the objective of gaining their own benefits ends up being perceived by the market, which in turn penalizes the company with the reduction in the value of its stocks. However, the use of hedge derivatives by the organizations leads the market to the perception of lower risk of the company, contributing to the increase of its value. As has been noted, such results have the potential to contribute to several information users, among them academics, investors and, above all, managers, who come to know the effects of discretionary accruals and of the hedge transactions on the value of the companies, being this primordial to maintain the organizations that manage perennials in the current competitive environment, happening to carry out actions that bring credibility and relative security to the investors that, consequently, will maximize the value of the company in the stock market. [ABSTRACT FROM AUTHOR]

Este estudo teve por objetivo investigar o efeito isolado dos accruals discricionários no erro de previsão do fluxo de caixa operacional das companhias brasileiras de capital aberto. A metodologia utilizada no desenvolvimento da pesquisa obedeceu a três etapas: a) mensuração do erro de previsão do fluxo de caixa operacional por meio da série temporal autorregressiva em um período (AR1); b) mensuração dos accruals discricionários pelo modelo de Pae (2005); c) estimação dos efeitos das acumulações discricionárias e dos incentivos ao gerenciamento de resultado no erro de previsão do fluxo de caixa operacional. A amostra foi formada por 363 empresas brasileiras de capital aberto que possuíam dados disponíveis na base de dados do Economática entre o período de 2008 a 2015. Os resultados revelaram que os accruals discricionários oportunos têm influência positiva sobre o erro de previsão do fluxo de caixa operacional, sugerindo, que práticas oportunistas dos gestores podem prejudicar a capacidade informacional de parte dos accruals. Esse achado sugere que os usuários da informação contábil, especialmente, os analistas de mercado que emitem previsões de fluxo de caixa, devem levar em consideração o efeito isolado dos accruals discricionários frente às acumulações totais na margem de erro da previsão do fluxo de caixa. [ABSTRACT FROM AUTHOR]

This paper examines the relation between earnings management (EM) and auditing main variables (the audit firm size and its report) in a balanced panel of Brazilian listed firms during the period 2012-2015. We estimate EM through both Kasznik (1999) and Kothari, Leone and Wasley (2005) models. As result, EM positive relationship with audit report qualifications means that higher level of discretionary accruals triggers the issuance of a modified audit opinion. The second finding of the proposed model, the negative relationship between audit qualifications and the presence of a Big4 auditor, is both explicated by its capacity to inhibit EM and by its clients' financial characteristics. [ABSTRACT FROM AUTHOR]

The aim of this study was to analyze the implications of BTDs, arising from earnings and tax management practices, discretionary accruals and the quality of accruals in listed companies listed in Brazil. Methodologically, we considered a sample of 290 companies and the period from 2002 to 2015, with the calculation of an abnormal BTD measure for the Brazilian context. Then, the Abnormal BTDs were associated with earnings management proxies, which were obtained from Dechow, Sloan and Sweeny (1995) and Dechow and Dichev (2002). We used the dynamic panel data technique with generalized moments (GMM). The results indicated that the abnormal BTDs are due to the earnings management by discretionary accruals and by the decrease in the quality of accruals. With this, it was concluded and contributed with the literature that there are tendencies of informational asymmetry in BTD, mainly in its discretionary components, reducing the earnings quality. [ABSTRACT FROM AUTHOR]

This study examines the association between the voluntary disclosure of economic and financial information and earnings management. The outlined arguments on the subject are based on the assumption that consistent voluntary disclosure policies may reduce earnings management. The analysis is conducted on a random sample of 66 non-financial Brazilian listed companies in the 2005-2012 period. To measure voluntary disclosure, the index proposed by Consoni and Colauto (2016) is used. As a proxy for earnings management, discretionary accruals (DA) are estimated based on the model by Dechow, Sloan, and Sweeney (1995). The relationship between these measurements is analyzed using a model of simultaneous equations and by the random effects regression method with panel data. A significant negative relationship was expected a priori; however, the main result of the study indicates that voluntary disclosure and earnings management are not simultaneously determined or associated. Although the results obtained contradict certain theoretical assumptions, there are alternative explanations for this finding. The empirical set of evidence in this research, in addition to those in previous studies, should be interpreted with caution because there is no consensus on the measures for voluntary disclosure and earnings management. Second, several companies in Brazil may not be interested in providing high-quality voluntary disclosure because most of their shareholders enjoy private benefits of control. This issue reduces the importance of the potential market demand for information, stratifies information asymmetry, and does not prevent earnings management. [ABSTRACT FROM AUTHOR]

The present study aims to investigate the result management practices by companies in the periods close to share public offerings. The study sample was based on the listed companies at BM&FBovespa that held share public offerings from 2004 to 2013. The models used were Modified Jones (1995) and Pae (2005), and it was applied the data analysis in panel. The research results suggest that when enterprises manage their accounting results to reduce them, they seek to reduce the profit variability; but when the enterprises try to increase their profits through result managements, it is possible to observe that this practice is more intense in the quarterly that is closed to the share public offerings. [ABSTRACT FROM AUTHOR]

This article investigates the relationship between corporate social responsibility and earnings management. Using panel data methodology for a sample of Spanish non-financial companies between 2005 and 2012, we find a negative impact of corporate social responsibility practices on earnings management. Corporate social responsibility is related to ethical and moral issues concerning corporate decision-making. Engaging in socially responsible activities not only improves stakeholder satisfaction, but also has a positive effect on corporate reputation. The results show that corporate social responsibility practices may be an organizational device that leads to more effective use of resources, which then has a negative impact on earnings management practices. [ABSTRACT FROM AUTHOR]

Most earnings management and earnings quality studies rely on various types of discretionary accrual estimation models. Common assumptions when using these models is that the accrual generating process (AGP) is stable over time or that firms within the same industry have similar AGPs. These assumptions have, however, been challenged in a number of studies. Instead, it has been suggested that AGP is depicted by various accrual determinants and that firms should be grouped according to similarities in the AGP. The purpose of this study is to develop and assess the performance of a self-organizing map (SOM) local regression-based discretionary accrual estimation model. Overall, the results show that the SOM local regression model outperforms previously suggested discretionary accrual estimation models. For example, the detection rate of simulated earnings management for the SOM local regression model is almost twice the detection rate of the commonly used cross-sectional Jones model. In addition to outperforming previously suggested models, the SOM local regression model also gives a visual representation of the AGP of a specific firm in relation to other firms. [ABSTRACT FROM AUTHOR]

This article emphasizes the significance of researching the cross effect of using jointly external audit quality and ownership structure over managerial discretion in a largely unexplored, non-Western and emerging context. The analysis is based on a sample of 61 Tunisian firms listed and unlisted on the Tunis Stock Exchange and operating in the industrial and commercial sectors during the period 2007-2011. To provide evidence on this topic, we conduct an empirical examination. First, we examine the effect of external audit quality and ownership structure on the discretionary accruals for the whole sample. We find that only auditor reputation has a negative and significant effect on earnings management. Second, this article provides empirical evidence on the cross effect of external audit quality variables and capital concentration on earnings management. This test suggests that this combination has a negative and significant effect on earnings management in industrial firms but it has a positive and non significant effect in commercial firms. Finally, the third empirical test concerns the combined effect of external audit quality and institutional property on earnings management. We find that the cross effect of this combined relation is negatively and significantly associated with earnings management of industrial firms but it has no significant effect on the earnings management of commercial firms. As for the cross effect of the auditor seniority and the institutional property, it has a positive and a significant effect in the commercial sectors, while, it is positively and non-significantly associated with earnings management of industrial firms. [ABSTRACT FROM AUTHOR]

From a theoretical point of view organizations that choose to distribute dividends, have better earnings quality, represented by a lower level of earnings management (TONG; MIAO, 2011). Given that this relationship was studied in more developed markets, the aim of this study was to test this theory in companies listed on the BM & FBovespa. The results do not confirm the relationship between the choice of companies to pay dividends and a lower level of earnings management. This controversial relationship is persistent even when examining companies that pay dividends more frequently. When examined the dividend payment levels, we found that the companies in the sample, with higher levels of payout, unexpectedly are associated with higher earnings management levels. [ABSTRACT FROM AUTHOR]

International Financial Reporting Standards (IFRS) are considered to be instrumental for meeting requirements of comparability, relevance and transparency when examining companies' results globally. The idea of IFRS is rational and reasonable, though opponents, who disagree that IFRS might provide some benefit, exist. The information asymmetry between managers and stakeholders (especially investors) could potentially be decreased by using one set of accounting standards to ensure that all necessary information is available for decision making. However, managers might affect the reporting performance for their benefits. This paper examines the relationship between a single set of accounting standards--in this case IFRS--and earnings management. When looking at this relationship, the following question presents itself: can IFRS improve manager behaviour and decrease activities of earnings management? While some research (e.g. [10], [31], [23]) related to this topic has been conducted, results have not been conclusive. Some of the research has appeared to confirm the importance of IFRS, while other studies have demonstrated that mandatory IFRS adoption increases earnings management. IFRS may indeed influence earnings management, but not as an isolated issue. This relationship presents a fertile field for future research. [ABSTRACT FROM AUTHOR]

Earnings quality is not a measurable concept through only one variable, but there are several attributes that characterize earnings quality and employing one or another could influence the research conclusion without considering one of them the best measure of earnings quality. The study deals with measuring earnings quality through different alternatives used in previous literature. Then, we study there are significant differences among these different methods to measure the same attribute using the Friedman test. The results of this study demonstrate that not only the earnings attribute is crucial to assess earnings quality, but also the different ways of measuring them could determine the results. Thus, through the results, we can say that is a key issue for any research on earnings quality, defining and measuring this concept properly, since the results and conclusions may be determined by that decision. [ABSTRACT FROM AUTHOR]

This paper examines the association between institutional ownership and the earnings management behavior of some French absorbing firms. Using a sample of 76 French mergers and absorptions concluded over the period ranging from 2000 to 2010, we undertake to present some empirical evidence highlighting that absorbing-firms manipulate earnings relevant to the year preceding the merger-offer in the presence of institutional cross-holding. However, the presence of active institutions turns out to limit the managerial accruals discretion. The monitoring role exerted by the active-institutional investors does restrict the opportunities of earnings management around mergers and acquisitions. Further analyses suggest that the average value of discretionary accruals with regards to the absorbing firms proves to be influenced by the nature of merger deal (takeover vs. restructuring). [ABSTRACT FROM AUTHOR]

Highlights: [•] The FLR model outperforms the OLS model with short time-series. [•] The OLS model outperforms the FLR model with long time-series. [•] The predictive capability of both types of models increase with longer time-series. [•] The earnings management detection capability is relatively low for both models. [ABSTRACT FROM AUTHOR]

Company that has made a profit taken into consideration by investors when they take a decision to invest in a company and this expectation of investor referred to as "Exceeding Zero Threshold". In this paper focus on companies' propensities to meet or not meet this expectation of investors. We examined 7008 companies' quarterly financial report, 146 companies between 2000-2011. We find evidence that companies tend to meet the expectation of exceeding zero earning threshold of investor. Besides we find evidence that companies use discretionary accruals to meet this expectation of investors. [ABSTRACT FROM AUTHOR]

Abstract: A number of different models have been suggested for detecting earnings management but the linear regression-based model presented by Jones (1991) is the most frequently used. The underlying assumption with the Jones model is that earnings are managed through accounting accruals. Typically, the companies for which earnings management is studied are grouped based on their industries. It is thus assumed that the accrual generating process for companies within a specific industry is similar. However, some studies have recently shown that this assumption does not necessarily hold. An alternative approach which returns a grouping which is, if not optimal, at least very close to optimal is the use of genetic algorithms. The purpose of this study is to assess the performance of the cross-sectional Jones accrual model when the data set firms are grouped using a grouping genetic algorithm. The results provide strong evidence that the grouping genetic algorithm method outperforms the various alternative grouping methods. [Copyright &y& Elsevier]

This study aimed to investigate the relationship between book-tax differences (BTD) and earnings management in firms listed on the BM&F Bovespa. The final sample consisted of 485 observations (firm-year) and the analysis included the period from 2005 to 2009. Methodologically, two approaches were employed in this study: (I) frequency distribution and (ii) discretionary accruals -- Modified Jones Model. The findings indicate a directly proportional relationship between BTD and discretionary accruals. There was evidence that the firms manage their earnings in the same direction of the observed signal of BTD, and seek to present the amount of BTD in level and variation around the breakeven and thus avoid a relationship with low earnings quality. Additionally, evidence indicate that the size of firm and the adoption of the tax basis transition are inversely related to the level of discretionary accruals. [ABSTRACT FROM AUTHOR]

Abstract: A large body of studies has examined the occurrence of earnings management in various contexts. In most studies, the assumption has been that earnings are managed through accounting accruals. Thus, a range of accrual based earnings management detection models have been suggested. The ability of these models to detect earnings management has, however, been questioned in a number of studies. An explanation to the poor performance of the existing models is that most models use a linear approach for modeling the accrual process even though the accrual process has in fact proven non-linear in several studies. An alternative way to deal with the non-linearity is to use various types of neural networks. The purpose of this study is to assess whether neural network-based models outperform linear and piecewise linear-based models in detecting earnings management. The study comprises neural network models based on a self-organizing map (SOM), a multilayer perceptron (MLP) and a general regression neural network (GRNN). The results show that the GRNN-based model performs best, whereas the linear regression-based model has the poorest performance. However, the results also show that all five models assessed in this study estimate discretionary accruals, a proxy for earnings management, with some bias. [Copyright &y& Elsevier]

Extant studies focus on examining the developed capital markets and reveal mixed results for the association between real activities versus accruals-based earnings management. This study establishes a set of simultaneous equations that captures managers’ behaviors to boost (or suppress) earnings performance to examine whether real activities and discretionary accruals play mutually complement roles in earnings reporting in Taiwan. The two-stage least squares regressions results reveal that the realactivities manipulation comprehensive measure is positively associated with discretionary accruals and supports the complement hypothesis. It suggests that managers jointly and simultaneously use these two tools in strategic earnings reporting decisions. [ABSTRACT FROM PUBLISHER]

This paper focuses on earnings management around earnings benchmarks (avoiding losses and earnings decreases hypothesis) in international firms and non international firms belonging to the Spanish hotel industry. First, frequency histograms are used to determine the existence of a discontinuity in earnings in both segments. Second, the use of discretionary accruals as a tool to meet earnings benchmarks is analysed in international and non international firms. Empirical evidence shows that international and non international firms meet earnings benchmarks. It is also noted different behaviour between international and non international firms. [ABSTRACT FROM AUTHOR]

Under agency theory and assumptions of earnings management, the objective is to study the relationship between earnings management (EM) and the cost of debt (Ki) of Brazilian publicly held companies in the period from 1996 to 2007. The assumptions raised through the literature are that targeting better contractual terms, like cost of debt, current or past cost, motivates the company to manage the current result so as to obtain better conditions for current or future cost. Thus, companies, intentionally, would seek to manage their results, motivated by the cost of debt. However, theoretical support for the relationship between these variables would be unidirectional, with EM influencing the cost of debt, supporting the second hypothesis. To reach the objective, the work used the EM model for the discretionary accruals proposed by Kang and Sivaramakrishnan (1995) as a proxy. The tests were based on Mann-Whitney's nonparametric U test, followed by the Hausman specification test for simultaneity analysis, ending with regression with panel data arranged with Newey- West correction. Tests showed the average for a positive relationship between EM and Ki, but the test did not indicate that there is a simultaneous inter-relationship between variables. The results of the panel regression indicates that Ki does not influence EM, but there is a positive relationship between them, in which the higher the EM, the higher the Ki. [ABSTRACT FROM AUTHOR]

Under agency theory and assumptions of earnings management, the objective is to study the relationship between earnings management (EM) and the cost of debt (Ki) of Brazilian publicly held companies in the period from 1996 to 2007. The assumptions raised through the literature are that targeting better contractual terms, like cost of debt, current or past cost, motivates the company to manage the current result so as to obtain better conditions for current or future cost. Thus, companies, intentionally, would seek to manage their results, motivated by the cost of debt. However, theoretical support for the relationship between these variables would be unidirectional, with EM influencing the cost of debt, supporting the second hypothesis. To reach the objective, the work used the EM model for the discretionary accruals proposed by Kang and Sivaramakrishnan (1995) as a proxy. The tests were based on Mann-Whitney's, nonparametric U test, followed by the Hausman specification test for simultaneity analysis, ending with regression with panel data arranged with Newey-West correction. Tests showed the average for a positive relationship between EM and Ki, but the test did not indicate that there is a simultaneous inter-relationship between variables. The results of the panel regression indicates that Ki does not influence EM, but there is a positive relationship between them, in which the higher the EM, the higher the Ki. [ABSTRACT FROM AUTHOR]

Th is paper investigates the relations between auditing firms and their ability to mitigate earnings management. In this context, we analyze if discretionary accruals of publicly-traded companies audited by the "Big Four" (Deloitte Touche Tohmatsu, Ernst & Young, KPMG and PricewaterhouseCoopers) and other auditing firms are statistically diff erent. Th e final sample consists of 1,414 observations collected from the 1999-2005 period: 897 observations for publicly-traded companies audited by the "Big Four" and 517 representing other publicly-traded companies audited by other firms. Th e information content in the database was obtained from Economatica soft ware and "Divulgação Externa" available at the BOVESPA website to obtain information from auditing fi rms. We used KS model with instruments and non-parametric tests to verify the diff erence in discretionary accruals between these groups of firms. The results indicate that companies audited by the "Big Four" have a lower level of discretionary accrual than companies audited by other auditing firms, suggesting the capacity to mitigate earnings management. Additionally, we verified that there is little research in this subject in Brazil. [ABSTRACT FROM AUTHOR]

This paper analyzes classic models used in international academic literature to estimate discretionary accruals, which are an empirical proxy to detect earnings management. Additionally, it provides evidence that Brazilian public companies practice earnings management in response to capital market incentives. Initially, some important concepts are clarified, such as accruals and discretionary accruals. After a critical analysis of the main accruals model, the Kang & Silvaramakrishnan model (1995) was implemented in the context of Brazilian companies, which is technically considered the most accurate model for Brazil. To check the robustness of the model, circumstances were investigated where there were strong incentives to practice earnings management. The results confirm the earnings management hypothesis. Evidences were documented that Brazilian public companies manage their earnings to: a) Avoid reporting losses; b) Sustain recent performance and c) Worsen the current net income in order to have better future results (take a bath). [ABSTRACT FROM AUTHOR]

Brazilian companies with a Big 4 auditor have better accounting quality than those with a local auditor, when accounting quality is measured either by compliance with GAAP or by conservatism. However, the cross-sectional pattern of discretionary accruals--often used to measure accounting quality in other countries--is unrelated to quality in Brazil. In fact, companies with Big 4 auditors tend to recognize income more aggressively than companies with a local auditor. This is the opposite of what happens in other countries and it is consistent with local auditors interpreting the tax code (rather than GAAP) more aggressively than Big 4 auditors, due to the strong linkage that exists between the Brazilian tax code and financial reporting standards. [ABSTRACT FROM AUTHOR]