Earnings management and accounting income aggregation

Do Ownership Structure Characteristics Affect Italian Private Companies’ Propensity to Engage in the Practices of “Earnings Minimization” and “Earnings Change Minimization”?

“…Beaver, McNichols, & Nelson, 2007;Dechow, Richardson, & Tuna, 2003;Durtschi & Easton, 2005, 2009Holland, 2004;Lahr, 2014;McNichols, 2003), it has been widely used to detect the presence of earnings management practices (e.g. Baber & Kang, 2002;Beatty, Ke, & Petroni, 2002;Brown & Caylor, 2004;Burgstahler & Dichev, 1997;Collins, Pincus, & Xie, 1999;Coppens & Peek, 2005;Daske, Gebhardt, & McLeay, 2006;Degeorge, Patel, & Zeckhauser, 1999;Easton, 1999;Gore, Pope, & Singh, 2007;Hamdi & Zarai, 2012;Hayn, 1995;Holland & Ramsay, 2003;Jacob & Jorgensen, 2007;Kerstein & Rai, 2007;Marques et al, 2011;Moreira, 2006;Phillips, Pincus, Rego, & Wan, 2004;Poli, 2013aPoli, , 2013bRevsine, Collins, Johnson, & Mittelstaedt, 2009). According to this approach, we assume that a company practices EM if the reported earnings of a fiscal year, scaled to total assets of the previous fiscal year, assumes a value between 0 and 0.005 (0 is included, 0.005 is excluded) and that a company practices ECM if the reported earnings change of a fiscal year (determined as the difference between the reported earnings of a fiscal year and the reported earnings of the previous fiscal year), scaled to total assets of the second previous fiscal year, assumes a value between -0.0025 and 0.0025 (-0.0025 is included, 0.0025 is excluded).…”

Is gender diversity in ownership structure related to private Italian companies propensity to engage in earnings management practices?

“…Although, it has been criticized by some scholars (Beaver et al, 2007;Dechow et al, 2003;Easton, 2005, 2009;Holland, 2004;Lahr, 2014;McNichols, 2003), it has been widely used in the literature (Baber and Kang, 2002;Beatty et al, 2002;Brown and Caylor, 2004;Collins et al, 1999;Coppens and Peek, 2005;Daske et al, 2006;Degeorge et al, 1999;Easton, 1999;Gore et al, 2007;Hamdi and Zarai, 2012;Hayn, 1995;Holland and Ramsay, 2003;Huang and Hsiao, 2011;Jacob and Jorgensen, 2007;Kerstein and Rai, 2007;Marques et al, 2011;Moreira, 2006;Phillips et al, 2004;Poli, 2013aPoli, , b, 2015aRevsine et al, 2009).…”

Do auditors constrain benchmark beating behavior to a greater extent in the fourth versus interim quarters?

“…For example, Dichev and Skinner (2002) contend that there are contractual reasons, such as debt contracts, that motivate managers to meet or beat benchmarks, including zero earnings or zero earnings changes. Additionally, C-suite compensation may be explicitly or implicitly linked to meeting or beating benchmarks (Jacob & Jorgensen, 2007;Matsunaga & Park, 2001). While capital market incentives would be expected to motivate benchmark beating behavior for both interim and fourth quarters, contractual and compensation incentives would be expected to be substantially stronger during the fourth quarter.…”

“…Recently, researchers have considered whether firms' ability to meet an earnings benchmark differs between interim quarters and the fourth quarter (Brown & Pinello, 2007;Das, Shroff, & Zhang, 2009;Hansen, 2010;Jacob & Jorgensen, 2007;Kerstein & Rai, 2007). Das et al (2009) observe that it is not clear whether it is more or less likely for firms to meet an earnings benchmark for interim quarters or the fourth quarter.…”