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The Effect Of Sarbanes Oxley Act And Managerial Entrenchment On Earnings Management And The Value Relevance Of Earnings
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Book Synopsis The Effect of Sarbanes-Oxley Act and Managerial-entrenchment on Earnings Management and the Value Relevance of Earnings by : Anthony Chi-Yeung Ng
Download or read book The Effect of Sarbanes-Oxley Act and Managerial-entrenchment on Earnings Management and the Value Relevance of Earnings written by Anthony Chi-Yeung Ng and published by . This book was released on 2006 with total page 440 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Managerial Entrenchment and Value-Relevance of Earnings During the Pre- and Post- Sarbanes Oxley Periods by : Anthony C. Ng
Download or read book Managerial Entrenchment and Value-Relevance of Earnings During the Pre- and Post- Sarbanes Oxley Periods written by Anthony C. Ng and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the effect of the passing of Sarbanes-Oxley Act (SOX) of 2002 as well as managerial entrenchment characteristics of corporations on the value-relevance of earnings. Our sample of observations is partitioned into three sub-periods: the Pre-Scandal (Pre-SCA) period, the Enron scandal (SCA) period, and the period after the passage of the Sarbanes-Oxley Act (Post-SOX). We find that the value-relevance of earnings is significantly different for the three sub-periods. Using the existence of anti-managerial-entrenchment mechanisms as a measure of good corporate governance, we find that these measures have a positive impact on the value-relevance of earnings only during the SCA period. Furthermore, the positive impact only applies to firms that engaged in income-decreasing earnings managements during the prior year. We conclude that, from the standpoint of investors, there appears to be a substitution effect between good firm-specific corporate governance mechanisms and the strictness of the regulatory environment.
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 Introduction to Earnings Management by : Malek El Diri
Download or read book Introduction to Earnings Management written by Malek El Diri and published by Springer. This book was released on 2017-08-20 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis The Effect of Earnings Management on the Value Relevance of Accounting Information by : Christine I. Wiedman
Download or read book The Effect of Earnings Management on the Value Relevance of Accounting Information written by Christine I. Wiedman and published by . This book was released on 2004 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates whether opportunistic earnings management affects the value relevance of net income and book value in determining stock price. We document a decrease in the value relevance of earnings in the year of an equity offering for a group of firms that exhibit ex post evidence of earnings management. This decrease is greater for the discretionary component of earnings than for the non-discretionary component. We also find that book values play a more important role in determining stock price when earnings management is present. Our results are robust to model specification and the type of offering but are sensitive to firms' disclosure activity prior to the offering. Overall, the results suggest that investors are able to recognize and adjust for the effects of earnings management when setting stock prices.
Book Synopsis The Impact of the Sarbanes-Oxley Act on Earnings Management Using Classification Shifting by : Xudong (Daniel) Li
Download or read book The Impact of the Sarbanes-Oxley Act on Earnings Management Using Classification Shifting written by Xudong (Daniel) Li and published by . This book was released on 2017 with total page 10 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines whether the passage of the Sarbanes-Oxley Act (thereafter, SOX) curbs firms' earnings management behavior through shifting core expenses to special items. The passage of SOX could be an effective deterrent to misclassification activities as it aims to prevent accounting fraud and limit management misbehavior, imposing significant legal liabilities and stiffer penalties on managers for aggressive financial reporting. Alternatively, because classification shifting does not affect reported net income, thereby is less likely to be detected and associated with lower litigation risk, it is likely to be used as a substitute for accruals-based earnings management and therefore experiences an increasing trend in the post-SOX period. Using a sample period from 1988 to 2010, I find evidence consistent with the deterrent effect, that is, the magnitude of unexpected core earnings declines and firms shift fewer core expenses to special items after the passage of the SOX of 2002. My study adds to the literature on the impact of SOX on earnings management by finding that SOX is effective in curbing classification shifting between core earnings and special items, a form of earnings management that misrepresents components of earnings but has no effect on the bottom line income.
Book Synopsis The Impact of Sarbanes-Oxley Act on Cosmetic Earnings Management by : June Y. Aono
Download or read book The Impact of Sarbanes-Oxley Act on Cosmetic Earnings Management written by June Y. Aono and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the mitigating effect of Sarbanes-Oxley Act on cosmetic earnings management, referred by Kinnunen and Koskela (2003) as earnings manipulative behavior to round earnings such that they result in an upward bias. This behavior reports income numbers to achieve key cognitive reference points represented by N x 10k. Using Benford's law, our analysis compares the distribution of second digits in reported annual earnings for publicly listed U.S. companies between a two-year periods before and after the year 2002 when Sarbanes-Oxley Act went into effect. Our empirical results suggest that, in the two-year period prior to the Act, there was evidence of cosmetic earnings management. However, such behavior in manipulating earnings has noticeably decreased in the period after the Act. This finding is consistent with the notion that Sarbanes-Oxley Act has a deterring impact on corporate America's manipulative behavior to report earnings that achieve certain key reference points.
Book Synopsis Comparative Research on Earnings Management, Corporate Governance, and Economic Value by : Vieira, Elisabete S.
Download or read book Comparative Research on Earnings Management, Corporate Governance, and Economic Value written by Vieira, Elisabete S. and published by IGI Global. This book was released on 2021-02-12 with total page 433 pages. Available in PDF, EPUB and Kindle. Book excerpt: New trends are emerging regarding earnings management and corporate governance showing similarities and striking differences in the practices of different countries and economies. These new trends currently shape the field of modern corporate governance with crucial issues being looked at in governance law and practices, accounting systems, earnings quality and management, stakeholder involvement, and more. In order to advance these new avenues in corporate governance, research looks at accounting policies firms use in different opportunistic circumstances in order to manage earnings, the corporate governance practices in different countries, firm performance, and other dimensions of companies. The understanding of these topics is beneficial in understanding the current state of different types of firms and their practices in modern times. Comparative Research on Earnings Management, Corporate Governance, and Economic Value is focused on the investigation of key challenges and perspectives of corporate governance and earnings management and outlines possible scenarios of its development. The chapters explore this new avenue of research and cover theoretical, empirical, and experimental studies related to different themes in the global context of earnings management and corporate governance. This book is ideal for economists, businesses, managers, accountants, practitioners, stakeholders, researchers, academicians, and students who are interested in the current issues and advancements in corporate governance and earnings management.
Book Synopsis Earnings Quality by : Jennifer Francis
Download or read book Earnings Quality written by Jennifer Francis and published by Now Publishers Inc. This book was released on 2008 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting. Our reason for this choice stems from the view that the capital market uses of accounting information are fundamental, in the sense of providing a basis for other uses, such as stewardship. Because resource allocations are ex ante decisions while contracting/stewardship assessments are ex post evaluations of outcomes, evidence on whether, how and to what degree earnings quality influences capital market resource allocation decisions is fundamental to understanding why and how accounting matters to investors and others, including those charged with stewardship responsibilities. Demonstrating a link between earnings quality and, for example, the costs of equity and debt capital implies a basic economic role in capital allocation decisions for accounting information; this role has only recently been documented in the accounting literature. We focus on how the precision of financial information in capturing one or more underlying valuation-relevant constructs affects the assessment and use of that information by capital market participants. We emphasize that the choice of constructs to be measured is typically contextual. Our main focus is on the precision of earnings, which we view as a summary indicator of the overall quality of financial reporting. Our intent in discussing research that evaluates the capital market effects of earnings quality is both to stimulate further research in this area and to encourage research on related topics, including, for example, the role of earnings quality in contracting and stewardship.
Book Synopsis Earnings Management. The Influence of Real and Accrual-Based Earnings Management on Earnings Quality by :
Download or read book Earnings Management. The Influence of Real and Accrual-Based Earnings Management on Earnings Quality written by and published by GRIN Verlag. This book was released on 2024-01-31 with total page 81 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Sarbanes Oxley Effectiveness on the Earning Management by : Rachel Ang
Download or read book Sarbanes Oxley Effectiveness on the Earning Management written by Rachel Ang and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The study examined the degree to which the enactment of Sarbanes-Oxley Act (SOX), specifically Section 404, has impacted earnings management practices among Fortune 500 companies. Companies practice earnings management to (a) be selective about the information on financial performance investors receive, and (b) hide or misrepresent the corporation's true earnings. By examining the impact of regulatory intervention, accounting standard-setting organizations will have the opportunity to measure the strength of statutory oversight. Findings suggested that regulatory intervention through the implementation of SOX reduced the practice of earnings management. The findings enabled leadership to better understand the insight and to offer transformation to the companies' ethical paradigms. As corporate leaders have a fiduciary responsibility to behave ethically and responsibly to provide investors, employees, stakeholders, and the public with the ethically based financial reports.
Book Synopsis Earnings Management by : Kathleen Yates
Download or read book Earnings Management written by Kathleen Yates and published by Nova Science Publishers. This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Earnings management is an issue that directly affects the overall integrity and quality of financial reporting and to date, many studies have been conducted in an attempt to gain an understanding of whether firms are engaging in earnings management, why they do so, what are the motives that drive managers' discretionary behaviour, what are the economic consequences and whether investors can see through this behaviour? In this book, Chapter One reviews the developments and the trends in the contemporary earnings management research and discuss several possible avenues for future research. Chapter Two provides an overview of the most recent studies on earnings management in relation to the financial crisis and the institutional environment and firm characteristics. Chapter Three provides a description of the nowadays most commonly used methods for measuring earnings management in accounting and finance literature. Chapter Four examines earnings management and corporate social responsibility as an entrenchment strategy.
Book Synopsis The Impact of Earnings Management on the Value-Relevance of Financial Statement Information by : Catherine Whelan
Download or read book The Impact of Earnings Management on the Value-Relevance of Financial Statement Information written by Catherine Whelan and published by . This book was released on 2004 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the relative value-relevance of both earnings and book value in the presence of three alternative sources of earnings management: short-term discretionary accruals, long-term discretionary accruals, and total discretionary accruals. For firm's whose discretionary accruals indicate earnings management, the value-relevance of earnings is expected to be lower than for firms without earnings management. Furthermore, in the presence of earnings management, it is expected that there will be a shift from a reliance on earnings to a reliance on book value in the valuation process. This would be reflected in a decrease in the value-relevance of earnings and an increase in the value-relevance of book value. Discretionary accruals are commonly used as a measure of earnings management. A contribution of this paper is the development of models to estimate short-term and long-term discretionary accruals. This enables investigation of differential effect on value-relevance of earnings management through the use of short-term versus long-term discretionary accruals. The results demonstrate that earnings management has an impact on value-relevance. Moreover, earnings management via long-term discretionary accruals has a greater impact on the value-relevance of earnings and book value than earnings management via short-term discretionary accruals.
Book Synopsis The Sarbanes-Oxley Act and Mitigation of Earnings Management by : Caixing Liu
Download or read book The Sarbanes-Oxley Act and Mitigation of Earnings Management written by Caixing Liu and published by . This book was released on 2004 with total page 256 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Impact of Earnings Management on the Value-relevance of Earnings and Book Value by : Catherine Whelan
Download or read book The Impact of Earnings Management on the Value-relevance of Earnings and Book Value written by Catherine Whelan and published by . This book was released on 2004 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Earnings Management, Conservatism, and Earnings Quality by : Ralf Ewert
Download or read book Earnings Management, Conservatism, and Earnings Quality written by Ralf Ewert and published by . This book was released on 2012 with total page 133 pages. Available in PDF, EPUB and Kindle. Book excerpt: This monograph reviews economic models that study earnings management and conservatism in an information economics framework. Both introduce a deliberate or a mandatory bias in financial reports. The fundamental issue this monograph addresses is what economic effects these biases have on earnings quality. We focus on models of managers in firms interacting with rational capital market participants, and briefly consider some contracting models. The models allow us to analyze earnings management and rational inferences by market participants in equilibrium in a variety of settings and to pinpoint costs and benefits of earnings management. We discuss how investors can elicit the maximum information from the biased reports and what potential remedies actually achieve in equilibrium. For example, accounting standards that reduce discretion for earnings management may be detrimental from a welfare point of view. In rational expectations models earnings quality can be defined as the information content in reported earnings. We discuss the earnings response coefficient, value relevance, and accounting-based earnings quality measures and how they reflect changes in earnings quality. Further, we review analytical work on conservatism of accounting standards and why conservatism can be welfare-enhancing even though it introduces a bias in the earnings reports. It is exactly through this bias that the benefit arises. Therefore, a differentiated view of earnings management and conservatism is warranted; neither is principally desirable or undesirable, but this depends on the circumstances. The benefit of equilibrium models is that they offer a rigorous explanation for the phenomena and show that sometimes conventional wisdom does not apply. There exist subtle interactions between accounting standards, the institutional environment, and earnings management that lead to several insights that challenge conventional wisdom. The models describe the economics behind these results and the particular circumstances.
Book Synopsis Real and Accrual-Based Earnings Management in the Pre- and Post-Sarbanes Oxley Periods by : Daniel A. Cohen
Download or read book Real and Accrual-Based Earnings Management in the Pre- and Post-Sarbanes Oxley Periods written by Daniel A. Cohen and published by . This book was released on 2008 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
