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Consequences Of Real Earnings Management On Subsequent Operating Performance
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Book Synopsis Consequences of Real Earnings Management on Subsequent Operating Performance by : Gary K. Taylor
Download or read book Consequences of Real Earnings Management on Subsequent Operating Performance written by Gary K. Taylor and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using three criteria, we identify firms that may have engaged in real earnings management. We then investigate whether real earnings management activities lead to a significant decline in these firms' subsequent operating performances. Our test results demonstrate that firms identified as conducting real earnings management activities do not experience a significant decline in subsequent operating performance. The finding enhances our understanding of the process through which management evaluates the costs and benefits of real earnings management and helps address concerns about costs of the increase in real earnings management activities that arose due to the heightened accounting regulation implemented by the Sarbanes-Oxley Act.
Book Synopsis Real Earnings Management and Subsequent Operating Performance by : Denise Leggett
Download or read book Real Earnings Management and Subsequent Operating Performance written by Denise Leggett and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Real Earnings Management (REM) is the manipulation of business activities to meet an earning's threshold. Despite concern that REM activities create real economic costs, research on the relation between REM and subsequent operating performance is inconclusive. In this paper, a two-firm-level method of estimating abnormal discretionary expenditures is developed and a more proactive method of identifying REM activity is implemented. Using firm-level estimates of abnormal expenditures, strong evidence of REM negatively related to subsequent period return on assets and cash flows from operations is found. The results suggest that the inconclusive results in prior research may be in part due to estimating abnormal expenditures using industry-level models.
Book Synopsis What are the Consequences of Real Earnings Management? by : Katherine Ann Gunny
Download or read book What are the Consequences of Real Earnings Management? written by Katherine Ann Gunny and published by . This book was released on 2005 with total page 204 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Earnings Management by : Paulina Sutrisno
Download or read book Earnings Management written by Paulina Sutrisno and published by . This book was released on 2017 with total page 9 pages. Available in PDF, EPUB and Kindle. Book excerpt: Objective - The purpose of this research is to examine the consequences of accrual based earnings management and real earnings management on future operating performance. The firms studied engage in accrual-based earnings management with discretionary accrual measures using the modified Jones model and some of the following real earnings management activities: (1) Sales manipulation that accelerates the timing of sales through increased price discounts or cutting prices to boost sales in the current period; and/or (2) cutting of discretionary expenditures to increase income in the current period. Furthermore, the study examines the extent to which discretionary accrual and real earnings management affects subsequent operating performance (as measured by both return on assets and operating cash flows).Methodology/Technique - The sample manufacturing firms that engage in financial statement were listed on the Indonesian Stock Exchange between 2012 and 2014. The hypothesis testing method used in this research is multiple regression linear.Findings - The results suggest that accrual-based earnings management, with discretionary accrual measures, and real earnings management through sales manipulation and discretionary expenditures are positively associated with return on assets after one and two years. Meanwhile, accrual-based earnings management and real earnings management through sales manipulation enhances subsequent operating cash flows. However, real earnings management through discretionary expenditures does not influence operating cash flows.Novelty - This research contributes to the existing literature on the subsequent impact of accrual-based earnings management and real earnings management.
Book Synopsis The Effects of Real Earnings Manipulation on the Future Operating Performance by : Bazeet Badru
Download or read book The Effects of Real Earnings Manipulation on the Future Operating Performance written by Bazeet Badru and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study analyses the aspects of real earnings management proxy that involves sales manipulation employ by companies to improve current performance against the future performance. The main objective was centered on whether manipulation of earnings to show good performance in the current period has implication on future performance. In order to achieve the objective, secondary data for a total number of 117 company year observations over a period from 2009 to 2011 was used. The empirical analysis in this study provides evidence that the larger percentage of Nigerian companies engage in sales manipulation to mimic strong performance in the current period, which later has adverse consequences on their future performance. The implication is that real earnings management through sales manipulation has a negative effect on the future performance. Based on the results, it can be concluded that real earnings management has a negative influence on the future performance of companies. The study infers that this explains why most of the Nigeria companies could not survive in the long term because the manager's deceive investors by managing earnings to falsify performance.
Book Synopsis Real Earnings Management (REM) and Accrual Earnings Management (AEM) Around Seasoned Equity Offerings (SEOs) in Australia and Subsequent Operating Earnings Performance by : Darren Henry
Download or read book Real Earnings Management (REM) and Accrual Earnings Management (AEM) Around Seasoned Equity Offerings (SEOs) in Australia and Subsequent Operating Earnings Performance written by Darren Henry and published by . This book was released on 2013 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper examines the existence of real earnings management (REM) and accrual earnings management (AEM) around seasoned equity offerings (SEOs) undertaken by Australian firms. We also investigate the subsequent operating earnings performance of the SEO firms that engaged in earnings manipulation and undertake SEOs. Prior studies document the presence of earnings management using univariate tests; however, we provide the first evidence employing both univariate and multivariate tests of the existence and consequences of REM and AEM around the SEOs. We find that managers of Australian SEO firms tend to engage in REM and AEM in the SEO-years, and earnings management activity is greater in these years relative to non-SEO firms and in comparison to the non-issuing years of SEO firms. In addition, consistent with prior evidence, we find that SEO firms performs substantially negatively in the post-SEO period, and SEO firms that engaged in REM and/or AEM underperform significantly those that don't in the post-offering period. However, we document a non-linear earnings management effect, with SEO firms that engaged in greater levels of REM and undertake SEOs having significantly higher subsequent operating performance.
Book Synopsis Evidence on the Tradeoff Between Real Manipulation and Accrual Manipulation: to 25; Pages:26 to 50; Pages:51 to 75; Pages:76 to 100; Pages:101 to 120 by : Amy Yunzhi Zang
Download or read book Evidence on the Tradeoff Between Real Manipulation and Accrual Manipulation: to 25; Pages:26 to 50; Pages:51 to 75; Pages:76 to 100; Pages:101 to 120 written by Amy Yunzhi Zang and published by ProQuest. This book was released on 2000 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Real Earnings Management and Long-Term Operating Performance by : Patrick Vorst
Download or read book Real Earnings Management and Long-Term Operating Performance written by Patrick Vorst and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: I examine whether a reversal of an abnormal cut in discretionary investments is associated with the degree to which the cut is reflective of real earnings management (REM) and whether and how it predicts future operating performance. I define a reversal as occurring when a firm cuts discretionary investments to a below-expected level in one period and reverts back to at least the expected level of investment during the next period. Unlike accrual earnings management, REM involves deliberately altering the operations of the firm to influence reported accounting numbers. To the extent that such interventions diverge from optimality, they can expose the firm to real economic costs. I find that a reversal of an abnormal cut in discretionary investments in the year after the cut has taken place is indicative of REM. I further find that, on average, reversing cuts are associated with lower future operating performance, but that such results vary significantly depending on the various incentives to engage in REM, as well as other factors that affect its associated costs and benefits. These findings are of interest to investors, regulators and academics with respect to the identification and consequences of REM.
Book Synopsis Management Control Systems by : Kenneth A. Merchant
Download or read book Management Control Systems written by Kenneth A. Merchant and published by Pearson Education. This book was released on 2007 with total page 876 pages. Available in PDF, EPUB and Kindle. Book excerpt: With its unique range of case studies, real life examples and comprehensive coverage of the latest management control-related tools and techniques, Management Control Systems is the ideal guide to this complex and multidimensional subject for upper level undergraduates, postgraduates and practising professionals.
Book Synopsis The Relation between Earnings Management Using Real Activities Manipulation and Future Performance by : Katherine Gunny
Download or read book The Relation between Earnings Management Using Real Activities Manipulation and Future Performance written by Katherine Gunny and published by . This book was released on 2012 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the consequences of real activities manipulation. Using financial statement data, I identify firms that appear to engage in any of the following real activities manipulation (RM): reducing Ramp;D to increase income, reducing SGamp;A to increase income, timing of income recognition from the disposal of long-lived assets and investments, and cutting prices to boost sales in the current period and/or overproducing to decrease COGS expense. I then examine whether RM is associated with firms just meeting two earnings benchmarks (zero and last year's earnings). The results indicate that real activities manipulation of Ramp;D, SGamp;A, and production are positively associated with firms just meeting these earnings benchmarks. Next, I examine the extent to which real activities manipulation affects subsequent performance. A negative association between just meeting earnings benchmarks by using RM and subsequent performance supports prior research suggesting managers opportunistically use earnings management to the detriment of shareholders (i.e., managerial opportunism). A positive association is consistent with managers using operational discretion to attain benefits that allow better future performance or to signal future firm value. I find that firm-years reflecting RM to just meet earnings benchmarks have higher subsequent firm performance (compared to firm-years that do not engage in RM and miss or just meet the earnings benchmarks). In this setting, using RM to influence the output of the accounting system is not opportunistic, but consistent with managers attaining benefits that allow better future performance or signaling.
Book Synopsis Abnormal Real Operations, Real Earnings Management, and Subsequent Crashes in Stock Prices by : Bill B. Francis
Download or read book Abnormal Real Operations, Real Earnings Management, and Subsequent Crashes in Stock Prices written by Bill B. Francis and published by . This book was released on 2017 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the impact of firms' abnormal business operations on their future crash risk in stock prices. Computed based on real earnings management (REM) models, firms' deviation in real operations from industry norms (DRO) is shown to be positively associated with their future crash risk. This association is incremental to that between discretionary accruals (DA) and crash risk found by prior studies. Moreover, after Sarbanes-Oxley Act (SOX) of 2002, DRO's predictive power for crash risk strengthens substantially, while DA's predictive power essentially dissipates. These results are consistent with the prior finding that managers shift from accrual earnings management (AEM) to REM after SOX. We further develop a suspect-firm approach to capture firms' use of DRO for REM purposes. This analysis shows that REM-firms experience a significant increase in crash risk in the following year. These findings suggest that the impact of DRO on crash risk is at least partially through REM.
Book Synopsis The Effects of Real Earnings Management on the Firm, Its Competitors and Subsequent Reporting Periods by : Craig J. Chapman
Download or read book The Effects of Real Earnings Management on the Firm, Its Competitors and Subsequent Reporting Periods written by Craig J. Chapman and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior research hypothesizes managers strategically time retail price promotions to manage reported earnings. However, the reaction of competitors to such real earnings management behavior is less well studied. Consistent with the prior research, I show evidence that firms use fiscal quarter-end price promotions to accelerate sales inter-temporally in order to meet earnings targets they would otherwise have missed. By analyzing the combination of price promotions and earnings management incentives across the fiscal year, I demonstrate that firms respond more aggressively to the earnings management incentives of their competitors than to their pricing. I further show that price discounts related to earnings management incentives persist in subsequent reporting periods. These results highlight the complexity of corporate behavior in a real earnings management setting and the need to adequately control for competitor response in related research. Furthermore, they imply that firms with earnings management incentives encourage competitive responses, regardless of whether they actually reduce prices themselves. Subsequent text analysis of earnings related conference calls shows frequent examples of statements consistent with firms attempting to signal stable pricing commitments, possibly to discourage this type of competitive response.
Book Synopsis Earnings Management by : Joshua Ronen
Download or read book Earnings Management written by Joshua Ronen and published by Springer Science & Business Media. This book was released on 2008-08-06 with total page 587 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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?
Book Synopsis Research in Accounting in Emerging Economies by : Shahzad Uddin
Download or read book Research in Accounting in Emerging Economies written by Shahzad Uddin and published by Emerald Group Publishing. This book was released on 2010-12-02 with total page 310 pages. Available in PDF, EPUB and Kindle. Book excerpt: Includes research papers that examines various issues including the adoption of International Financial Reporting Standards (IFRS) and International Public Sector Accounting Standards (IPSASs), management accounting change in the context of public sector reforms, corporate reporting disclosures, auditing, etcetera.
Book Synopsis Effects of Audit Quality on Real and Accrual Earnings Management and Subsequent Return Performance by : Mohammad Alhadab
Download or read book Effects of Audit Quality on Real and Accrual Earnings Management and Subsequent Return Performance written by Mohammad Alhadab and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We find that IPO firms engage in real and accrual earnings management during the IPO and that big-N audit firms constrain discretionary expenses-based and accrual-based manipulations. The restriction of these forms of earnings management leads IPO firms to resort to a higher level of sales-based manipulation. Our results show that both sales-based and accrual-based earnings management predict post-IPO return underperformance, and that sales-based manipulation has the most severe negative consequences for future return performance. In addition, we find IPO firms audited by big-N audit firms experience a severe decline in post-IPO return performance due to the extensive use of sales-based manipulation that takes place during the offer year.
Book Synopsis Real Earnings Management by Benchmark-Beating Firms by : Brooke Beyer
Download or read book Real Earnings Management by Benchmark-Beating Firms written by Brooke Beyer and published by . This book was released on 2018 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior studies document both an improvement and deterioration in the future operating performance of firms engaging in real earnings management (REM) to meet earnings benchmarks. These results suggest that some firms use REM to signal their favorable prospects, whereas others use REM opportunistically. We hypothesize that firms with less robust information environments, more costly REM, and fewer incentives to meet short-term earnings benchmarks are more likely to engage in REM to signal future performance. Consistent with expectations, we find the positive relation between REM and future profitability is limited to firms that have less robust information environments (measured with stock return volatility, bid/ask spread, and analysts following), more costly REM (measured with market share and financial health), and fewer incentives to meet short-term earnings benchmarks (measured with market-to-book ratio, transient investors, and seasoned equity offering). In supplementary analysis, we note that Bhojraj et al. (2009) restrict their sample to relatively large firms, whereas Gunny's (2010) sample includes both large and small firms. Our analysis indicates that the difference in sample composition explains the differing results. We find that small firms use REM to signal positive future performance, but large firms do not.
Book Synopsis Firms' Real Earnings Management and Subsequent Stock Price Crash Risk by : Lingxiang Li
Download or read book Firms' Real Earnings Management and Subsequent Stock Price Crash Risk written by Lingxiang Li and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a large sample of U.S. firms for the period from 1994 to 2009, we find that firms' prior real earnings management (RM) is positively associated with their stock price crash. These results are robust to firm-fixed effects analysis, different crash likelihood measurements, and suspect-firm analysis. On the other hand, RM does not show any predicting power on positive jumps, which supports the argument that insiders use real activities to hide bad but not good information. We find that the predicting power of RM on crash risks after SOX 2002 is much stronger, with the marginal impact being nearly three times as it is in pre-SOX period. By contrast, and consistent with the finding by Hutton et al. (2009), the marginal impact of accrual-based earnings management on crash risks drops by about half after SOX.
