Comparison of the Companies on the BIST Sustainability Index with Other Listed Companies in the Context of Earnings Manipulation

Abstract

The concept of sustainability has been gaining importance all over the world. Concerns of consumers, investors, fund providers and governmental organizations about sustainability motivate companies to take action for a more sustainable world. Stock exchanges have also created sustainability related indices. The starting point of this study is the assumption that companies in the sustainability index are more respectful to the environment, society and economy and therefore, they are also more trustworthy when presenting their earnings. Earnings manipulation was detected by using the Beneish Model (1999). The M-scores of BIST non-financial firms were calculated for the years 2017 (262 firms) and 2018 (261 firms). The results showed that nearly half of the sample firms were possibly manipulators in both years. Additionally, nearly 40 percent of the firms on the sustainability index were manipulators. Although the percentage of manipulating firms in the sustainability index is lower compared to the percentage of manipulators in all firms, according to the results of statistical tests, there is no significant difference between the earnings manipulation behaviours of companies in the sustainability index and those not in the index.

Warnings of financial fraud in travel agencies in the Republic of Serbia during the COVID-19 pandemic

“…Z" = 3.25 + 6.56 X1 + 3.26 X2 + 6.72 X3 + 1.05 X4 (5) where the X4 variable is calculated as in the Z' model, and for companies that have a negative value of Z", the probability of bankruptcy is very high.…”

“…These models have been widely employed in recent research, both in developed and developing countries (e.g. Atik Yildirim & Kovačević, 2022;Ebaid, 2023;Kukreja et al, 2020;MacCarthy, 2017;Suffian et al, 2022), Serbia being no exception (Dimitrijević & Danilović, 2017;Dimitrijević et al, 2018;Knežević et al, 2021;Milašinović et al, 2022) and even in the tourism and hospitality industry (Milašinović et al, 2022).…”