Earnings Management, Capital Structure and the Role of Institutional Environments

An, Zhe; Li, Donghui; Yu, Jin

doi:10.2139/ssrn.2207804

Cited by 33 publications

(58 citation statements)

References 25 publications

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“…The leverage (in line with An et al, 2013), sales growth (as observed by Dechow, Hutton, Kim, & Sloan, 2012), and ROA (as observed by Silva, Weffort, Flores, & Silva, 2014;McNichols, 2000;and Kothari et al, 2005) variables exhibit, statistically, a significant and positive effect on the level of earnings management.…”

Section: Resultsmentioning

confidence: 75%

“…Schipper (1989) had already found this relationship, suggesting that this intentional intervention in the financial reporting process could generate private gains. An, Li, and Yu (2013) also analyzed the effect of EM in financial leverage. The study aimed to verify how the EM/leverage relationship is influenced by institutional environments.…”

Section: Earnings Managementmentioning

confidence: 99%

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Debt Issues and Earnings Management

Sincerre

Sampaio

Famá

et al. 2016

Rev. contab. finanç.

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The aim of this paper is to analyze earnings management (EM) surrounding debenture issues of companies listed on the BM&FBOVESPA. EM is an intentional intervention in external financial reports in order to obtain some private gain. This practice is especially important at the time of issuing debentures because if earnings are inflated, investors may pay an artificially high price. To measure earnings management, current discretionary accruals were used as a proxy, based on the Modified Jones and Modified Jones with ROA econometric models. All of the regressions considered the fixed effects of the companies and the time series effects of the analyses. Evidence was found that companies inflate their financial results in the issuing period in order to positively influence their investors. The results suggest that there is EM in the quarter preceding the issue (t = -1), indicating the influence that investors may have been under when making the decision to invest in debentures from these companies. In addition, it was verified that companies with higher debt, profitability, and sales growth ratios have higher levels of earnings management. The reputation of the auditor was not statistically significant regarding reductions in the level of management. The results also show that companies listed on Level II and New Market had higher levels of management when considering the Modified Jones with ROA model. Therefore, it can be concluded that there is a greater level of earnings management in companies that issue debentures in the period preceding the event. Finally, the variable that is directly related to the level of earnings management is sales growth.

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Section: Resultsmentioning

confidence: 75%

Section: Earnings Managementmentioning

confidence: 99%

Debt Issues and Earnings Management

Sincerre

Sampaio

Famá

et al. 2016

Rev. contab. finanç.

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“…To mitigate the impact of omitted variables on our conclusions, we must first find a suitable instrumental variable not directly correlated with corporate R&D innovation but able to directly influence a firm's real estate ownership. For this purpose, we follow the method of Lin et al (), Chen (), and An et al () by using average industry‐year‐city real estate ownership ( Meanrevalue ) as the IV of corporate real estate ownership.…”

Section: Resultsmentioning

confidence: 99%

The effect of corporate real estate ownership on R&D innovation: credit relief vs. resource replacement in China

Deng

Yang

2020

Asian-Pac Economic Lit

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Against the background of supply-side structural reform and the real estate financialisation in China, this study investigates the impact of real estate holdings on R&D investment using data of enterprises listed on the Shanghai and Shenzhen stock exchanges. Our empirical results yield five main findings. First, enterprises holding more real estate assets face more serious financial constraints, thus restraining corporate innovation. Second, when the profit margin gap between enterprises and the real estate industry is larger, enterprises are more inclined to transfer industrial capital into the real estate industry, thus reducing R&D investment. Third, when the degree of marketisation is high, intensified market competition, the optimal allocation of factor and product markets, and stronger patent protection will weaken the restraining effect of corporate real estate holdings on R&D investment. Fourth, when monopoly enterprises gain higher profits rather than incurring risks from the real estate industry, they are more willing to hold real estate, thus strengthening the restraining effect of real estate holdings on innovation. Finally, investors' regional preference intensifies the restraining effect of corporate real estate holdings on R&D investment.

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“…Based on the review made to the related literature of earnings management phenomenon, and the prior related researches, it is apparent, that some prior researches found no relationship between the capital structure and the phenomenon of earnings management (Mozarpour and Norouzi, 2015) (An, Li, and Yu, 2013) (Zamri, Abdul Rahman, and Isa, 2013) (Roodpohti and Chashmi, 2011), whereas other showed that this relation exists (Uwuigbe, Ranti, and Bernard, 2015) (Benkraiem, 2012) (Tahir, 2011) (Zhang and Liu, 2009), despite that among which, some declared that this relation is positive, while others declared that it is negative. These different findings must be considered incentives for authors and academics for more investigations of the phenomenon of earnings management in different countries, especially the developing countries.…”

Section: Asian Journal Of Finance and Accountingmentioning

confidence: 99%

Capital Structure Effect on the Practices of Earnings Management Phenomenon? The Evidence of Listed Firms in Abu Dhabi Securities Exchange

Obeidat¹

2016

AJFA

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<p align="center">The study objects for determining whether the listed firms in Abu Dhabi Securities Exchange exercise the phenomenon of earnings management in its financial reporting, and whether these practices are affected or driven by the capital structure of firms. To achieve the objectives of the study, a sample consisting of 29 listed firms at Abu Dhabi Securities Exchange (ADX) out of total 83 listed firms, had been selected using the simple random sampling method. Data covering 4-years was collected from the included firms in the sample, starting from 2012 till the end of 2015. The binomial distribution test is used to determine whether listed firms at ADX exercise the phenomenon of earnings management using the modified Jones 1995 model, whereas, the simple linear regression method is used to test whether the proportion of financial leverage in the capital structure of firms drives the practices of earnings management. The study shows that the firms exercise the phenomenon of earnings management, and the regression outputs show a significant positive effect of financial leverage on the practices of earnings management phenomenon. </p>

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Earnings Management, Capital Structure and the Role of Institutional Environments

Cited by 33 publications

References 25 publications

Debt Issues and Earnings Management

Debt Issues and Earnings Management

The effect of corporate real estate ownership on R&D innovation: credit relief vs. resource replacement in China

Capital Structure Effect on the Practices of Earnings Management Phenomenon? The Evidence of Listed Firms in Abu Dhabi Securities Exchange

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