Earnings Management. The Influence of Real and Accrual-Based Earnings Management on Earnings Quality
Earnings Management. The Influence of Real and Accrual-Based Earnings Management on Earnings Quality

Author:

Publisher: GRIN Verlag

Published: 2024-01-31

Total Pages: 81

ISBN-13: 3964875953

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Master's Thesis from the year 2019 in the subject Business economics - Accounting and Taxes, University of Duisburg-Essen, course: Master Thesis, language: English, abstract: This paper delves into various theories and approaches, aiming to define and differentiate earnings management from related concepts such as fraud, expectation management, and impression management. It explores the goals and incentives driving earnings management, including maximizing or minimizing earnings, beating targets, and smoothing. At the onset of the new millennium, corporate scandals rocked the business world, eroding trust in management, boards of directors, and the accounting profession. In response, regulations and policies aimed at enhancing corporate governance and financial reporting were swiftly implemented. The credibility, clarity, and consistency of financial reporting practices play a pivotal role in enabling investors to make informed decisions. Accurate and fair financial performance representations, as opposed to inflated and misleading figures, are essential for market players, including shareholders and creditors. Investors rely on audited financial reports to guide their investment decisions, underscoring the critical importance of accuracy and reliability in publicly available financial disclosures. Auditors, by reducing the risk of material misstatement, ensure the integrity of the information disclosed in a company's financial statements. Management, with the goal of achieving promised targets and ensuring the company's existence, may engage in earnings management as a strategic contribution to corporate policy. Financial reporting serves as a means to distinguish well-performing companies from their counterparts, facilitating efficient resource allocation and empowering stakeholders to make effective decisions. The disclosed earnings results significantly impact a firm's overall business activities and management decisions, particularly in satisfying analysts' expectations, which can influence equity value. While accounting standards play a role, the quality of financial statements is more influenced by company-specific and institutional factors shaping managers' incentives. These factors lead to financial reporting practices being viewed as the outcome of a cost-benefit assessment.

Introduction to Earnings Management
Introduction to Earnings Management

Author: Malek El Diri

Publisher: Springer

Published: 2017-08-20

Total Pages: 120

ISBN-13: 3319626868

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This book provides researchers and scholars with a comprehensive and up-to-date analysis of earnings management theory and literature. While it raises new questions for future research, the book can be also helpful to other parties who rely on financial reporting in making decisions like regulators, policy makers, shareholders, investors, and gatekeepers e.g., auditors and analysts. The book summarizes the existing literature and provides insight into new areas of research such as the differences between earnings management, fraud, earnings quality, impression management, and expectation management; the trade-off between earnings management activities; the special measures of earnings management; and the classification of earnings management motives based on a comprehensive theoretical framework.

Earnings Management
Earnings Management

Author: Joshua Ronen

Publisher: Springer Science & Business Media

Published: 2008-08-06

Total Pages: 587

ISBN-13: 0387257713

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This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?

A Synthesis and Analysis of Models Measuring Accrual Based and Real Activities Earnings Management
A Synthesis and Analysis of Models Measuring Accrual Based and Real Activities Earnings Management

Author: Anna-Fani Constantatos

Publisher:

Published: 2016

Total Pages:

ISBN-13:

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This chapter provides a description of the nowadays most commonly used methods for measuring earnings management in the accounting and finance literature. First, it covers the most important and commonly used models of accrual based earnings management (i.e., Jones, 1991; Dechow et al., 1995; Teoh et al., 1998 a, b; DeFond and Park, 2001; Dechow and Dichev, 2002; Larcker and Richardson, 2004; Kothari et al., 2005 and Dechow et al., 2012). In sequence, it describes the most important and commonly used models that examine real activities earnings management (Roychowdhury, 2006; Gunny, 2010). Finally, the chapter summarises briefly the most common determinants and motives for earnings management. On that basis, this chapter provides a practical guidance on how scholars can apply earnings management models, after considering their advantages and disadvantages. It also considers the suggested solutions offered in the literature, which aim to overcome problems in their implementation.

Real and Accrual-Based Earnings Management in the Pre- and Post-Sarbanes Oxley Periods
Real and Accrual-Based Earnings Management in the Pre- and Post-Sarbanes Oxley Periods

Author: Daniel A. Cohen

Publisher:

Published: 2008

Total Pages: 52

ISBN-13:

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We document that accrual-based earnings management increased steadily from 1987 until the passage of the Sarbanes Oxley Act (SOX) in 2002, followed by a significant decline after the passage of SOX. Conversely, the level of real earnings management activities declined prior to SOX and increased significantly after the passage of SOX, suggesting that firms switched from accrual-based to real earnings management methods after the passage of SOX. We also find evidence that the accrual-based earnings management activities were particularly high in the period immediately preceding SOX. Consistent with these results, we find that firms that just achieved important earnings benchmarks used less accruals and more real earnings management after SOX when compared to similar firms before SOX. Finally, our analysis provides evidence that the increases in accrual-based earnings management in the period preceding SOX were concurrent with increases in the fraction of equity based compensation.