Does financial crisis impact earnings management? Evidence from Turkey

Türegün, Nida

doi:10.1002/jcaf.22418

Cited by 19 publications

(16 citation statements)

References 23 publications

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“…Thus, managers feel less inclined to engage in more EM during such a severe economic crisis because it would be ineffective, resulting in a lower degree of earnings control (Chintrakarn et al, 2018). Also, the supportive findings on the improved earnings quality and reduced EM practices during the crisis's periods can be attributed to the decreased managerial incentives to manage their earnings during the crises because investors are probably willing to tolerate firms' low profitability in these times, and thus, the market does not penalize firms for poor performance (Türegün, 2020). As a result, firms are more likely to engage in less EM practices during the times of crises.…”

Section: Earnings Management Practices During Crises and Pandemicsmentioning

confidence: 97%

Earnings management and investor protection during the COVID-19 pandemic: evidence from G-12 countries

Ali

Amin

Mostafa

et al. 2022

MAJ

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Purpose The purpose of this paper is to examine the inter-relations among the strength of investor protection institutions, earnings management (EM) and the COVID-19 pandemic. Design/methodology/approach As a proxy for EM, the authors use discretionary accruals measure, estimated using the modified Jones model (1991). As a proxy for the strength of investor protection institutions, the study uses the Investor Protection Index, extracted from the Global Competitiveness Reports. The sample consists of 5,519 firms listed in the Group of Twelve countries during 2015–2020. Findings The study shows that firms tend to engage less in EM during the pandemic period. The authors also find a significantly negative relation between the strength of investor protection institutions and EM practices, and interestingly, this negative relation was found to be more pronounced during the pandemic period. Research limitations/implications For investors and practitioners, the findings help get insights into the behavior of firms in response of the pandemic shock in countries with solid institutional and legal protection. For policymakers, the findings reaffirm the critical role that institutional incentives and reforms can play, in influencing firms to exert more efforts to promote their financial reporting quality. Originality/value To the best of our knowledge, the study is one of the first attempts to examine the link between EM practices and investor protection during the COVID-19 pandemic. The findings extend both the literature on the role of institutional factors in promoting the earnings quality and the literature on COVID-19’s effect on firm performance and practices.

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Section: Earnings Management Practices During Crises and Pandemicsmentioning

confidence: 97%

Earnings management and investor protection during the COVID-19 pandemic: evidence from G-12 countries

Ali

Amin

Mostafa

et al. 2022

MAJ

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“…This view is consistent with agency theory, which purports that the selfish interests of the managers, coupled with information asymmetry, generally result in exploitation at the expense of the owners ( Healy, 1985 ; Kothari, 2001 ; Schipper, 1989 ). Empirical evidence suggests high earnings manipulations, especially in the early stages of the financial crisis when earnings were on the rise ( Türegün, 2020 ). Various reasons are identified in the literature as drivers of earnings management practices during financial crises.…”

Section: Literature Review Theory and Hypotheses Developmentmentioning

confidence: 99%

The impact of religiosity on earnings quality: International evidence from the banking sector

Abdelsalam

Chantziaras

Ibrahim

et al. 2021

The British Accounting Review

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“…Consequently, Kumar and Vij notice how "firms have less incentive to engage earnings management during the crisis" [20; p.89]. Türegün [22] also points out how "the presence of lower manipulation of earnings during the crisis period may be credited to certain motivation, for example, lower incentive for management for manipulating the earnings, higher market acceptance toward lower performance by the firms and increased surveillance of government authorities, auditors and exchange boards during such periods of economic distress" [22; p.70]. Authors also note how crises may serve as an excuse for a company's poor performance and therefore managers are less motivated for earnings management behaviour [19].…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…Türegün [22] examined the impact of the financial crisis in 2008 on the earnings management practices of Turkish firms in period 2007-2012. The author analysed earnings management behavior in three periods: pre-crisis period (2007 and 2008), crisis period (2009 and 2010), and the post-crisis period (2011 and 2012).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Earnings Management and Dividend Payments during the Covid-19 Pandemic

Filipović¹,

Bartulović²,

Šušak³

2022

Interdisciplinary Description of Complex Systems

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The recent outbreak of coronavirus has caused the worst global economic crisis in the last few decades. A substantial number of companies have experienced severe economic difficulties and were tempted to adjust their financial figures in order to reach certain business thresholds. Maintaining an existing level of dividend payments is a powerful incentive to engage in such activities.The aim of this article was to estimate the effect of the economic crisis caused by the COVID-19 pandemic on the relationship between the estimated level of earnings management and dividend payments made by companies.Research models were estimated using panel analysis. The Modified Jones model was utilized to assess the level of earnings management. A total of 56 companies listed on the Zagreb Stock Exchange in the Republic of Croatia with their financial data from 2015 to 2020 were included in the research sample.Unlike in the case of absolute and income-decreasing discretionary accruals, results indicated that the economic crisis caused by the COVID-19 pandemic positively affected the relationship between earnings management and dividend payments in the case of income-increasing accruals regarding companies that made regular dividend payments.In conclusion, the economic crisis caused by the COVID-19 pandemic was an additional incentive for certain companies to perform income-increasing earnings management to reach the desired level of dividend payments.

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Does financial crisis impact earnings management? Evidence from Turkey

Cited by 19 publications

References 23 publications

Earnings management and investor protection during the COVID-19 pandemic: evidence from G-12 countries

Earnings management and investor protection during the COVID-19 pandemic: evidence from G-12 countries

The impact of religiosity on earnings quality: International evidence from the banking sector

Earnings Management and Dividend Payments during the Covid-19 Pandemic

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