Earnings management and theoretical adjustment in capital structure performance pattern: Evidence from APTA economies

Shoaib, Adnan; Siddiqui, Muhammad Ayub

doi:10.1016/j.bir.2020.12.001

Cited by 17 publications

(10 citation statements)

References 86 publications

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“…This translates into improved business management procedures, as managers will be more cautious about spending cash (Vo 2021). According to the agency costs theory, an optimal capital structure that maximises the value of a company can be achieved by minimising the conflicts of interest between the stakeholders (Shoaib and Siddiqui 2020). As the share of debt increases, agency costs change ambiguously.…”

Section: Discussionmentioning

confidence: 99%

Impact of Capital Structure on Corporate Value—Review of Literature

Kruk

2021

JRFM

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The issue of capital structure in an enterprise is often described in the literature on the subject; however, theories are classified into various approaches, and their characteristics are often limited to selected theories. This work is an attempt at a synthetic presentation of the theory of capital structure. The aim of the article was to review and try to organise the most important theories of capital structure, paying attention to the influence of capital structure on the processes of creating value. The paper also highlights the most important theoretical works in this area. The study consists of two main parts. The first part indicates the diversity of defining the concepts of capital structure and indicates the approaches in classifying this structure. The second part characterises the theories of capital structure in the context of value creation. Based on the presented theories, it can be stated that there is no agreement as to whether and to what extent capital structure translates into the process of creating enterprise value. Therefore, it seems justified to conduct appropriate empirical research in this respect.

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Section: Discussionmentioning

confidence: 99%

Impact of Capital Structure on Corporate Value—Review of Literature

Kruk

2021

JRFM

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“…The adoption of fair value accounting practices provides opportunities to managers to adopt earnings management practices. When firms manipulate their earnings, they can use not only accrual earnings management, which is done through applying different accounting methods, but also real earnings management, which is achieved through real operation activities or transactions (Li et al , 2020; Shoaib and Siddiqui, 2020). Therefore, managers use accrual earnings management and real earnings management to achieve their objectives.…”

Section: Theoretical Frameworkmentioning

confidence: 99%

White-collar money laundering through opportunistic earnings management: fair value accounting practices of failed finance companies in Sri Lanka

Jayasekara¹,

Perera

Ajward

2022

JFC

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Purpose The purpose of this paper is to discuss how the failed finance companies in Sri Lanka used fair value accounting practices as an opportunistic earnings management practice to launder money under weak corporate governance structures. Design/methodology/approach This paper uses a qualitative design under the philosophy of interpretivism. The case study research strategy is used inductively to investigate how fair value accounting had been used for money laundering. Findings The dishonest intention of major shareholders and board of directors had forced failed companies to misuse fair value accounting to manipulate performance and use them for personal benefits which were detrimental to the depositors and stability of the companies. The weak corporate governance structures which were developed because of regulatory forbearance were influential for manipulations. The concentrated ownership had reduced agency conflicts between shareholders and managers because major shareholders were the members of the board of directors. The appointed committees were not effective because of an inadequate number of independent directors with sufficient expertise. The reduced agency conflict between shareholders and managers has exaggerated the agency conflict with depositors. Therefore, it is recommended to dilute ownership concentration to establish good corporate governance structures and make stable institutions. Research limitations/implications This study does not discuss the dishonest fair value accounting practices of all licensed finance companies because of the sensitivity of the matter for surviving companies. Originality/value This paper is an original work of the authors which discusses how fair value accounting practices had been used to launder money in failed finance companies in Sri Lanka as an emerging market context.

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“…The other view of using different accounting practices and performance relates to the earnings management practices of firms. When firms manipulate their earnings, they can use not only accrual earnings management, which is done (Shoaib and Siddiqui, 2020) through applying different accounting methods, but also real earnings management, which is achieved through real operation activities or transactions (Li et al , 2020; Shoaib and Siddiqui, 2020). Therefore, managers use accrual earnings management and real earnings management to achieve their objectives.…”

Section: Implications Of Different Accounting Practices On Performancementioning

confidence: 99%

Fair value accounting practices in the banking industry: a possible opportunity to launder money through manipulated performance

Perera

Ajward

Jayasekara³

2021

JMLC

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Purpose The purpose of this paper is to discuss the possible money laundering threats in fair value accounting practices giving particular attention to the list of predicate offences under recommendations of Financial Action Task Force (FATF). Design/methodology/approach This paper discusses case studies related to global accounting scandals and link outcomes of those scandals with the list of predicate offences given in FATF recommendations to build propositions. Findings The analysis reveals that legal proceedings on major accounting scandals show that legal proceedings have been restricted owing to a lack of evidence because of the technicality of frauds. Often the authorities have failed to prove cases under the list of current predicate offences which can be linked to accounting malpractices, i.e. fraud. Therefore, policymakers are required to revisit the list of predicate offences and the feasibility of considering accounting malpractices as a predicate offence to strengthen the corporate governance practices in regulated institutions. The adoption of fair value accounting practices provides opportunities to managers to adopt earnings management practices under a fair value accounting regime to maintain stable performance. The fair value practice recognizes unrealized gains which are not based on transactions giving bank managers an opportunity to repeat the outcomes of the discussed accounting scandals. Therefore, it is essential to criminalize accounting malpractices to strengthen the corporate governance practices in the banking industry and prevent possible accounting scandals. Research limitations/implications This study was designed to discuss the implications of fair value accounting practices on possible opportunities of money laundering. This paper provides only a viewpoint based on the analysis. Therefore, an empirical analysis is required to establish the authors’ views in a fair value accounting regime. Originality/value This paper is an original work done by the authors which discuss the implications of fair value accounting practices on possible money laundering. The views are original ideas of the authors in this context.

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Earnings management and theoretical adjustment in capital structure performance pattern: Evidence from APTA economies

Cited by 17 publications

References 86 publications

Impact of Capital Structure on Corporate Value—Review of Literature

Impact of Capital Structure on Corporate Value—Review of Literature

White-collar money laundering through opportunistic earnings management: fair value accounting practices of failed finance companies in Sri Lanka

Fair value accounting practices in the banking industry: a possible opportunity to launder money through manipulated performance

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