Is Earnings Management Informational or Opportunistic? Evidence from ASEAN Countries

Abstract

This study explores the informational and opportunistic characteristics of earnings management in ASEAN countries. Earnings management has an impact on the profitability of the companies. A positive relation between earnings management and future profitability reveals that earnings management is informational. However, negative a relation between earnings management and future profitability indicates that earnings management is opportunistic.This study uses data from the OSIRIS database. Four hundred and eighty five (485) companies from the Philippines, Indonesia, Malaysia, Singapore, and Thailand are used as a sample. This study focuses on 2 types of earnings management: (1) accrual earnings management and (2) real earning management. Modified Jones model is used for the accrual earnings management. Real earnings management follows Roychowdury (2006).The results show that the characteristics of earnings management are not consistent. Real earnings management is informational in Thailand, but opportunistic in Indonesia. Accruals earnings management is informational in the Philippines, but opportunistic in Malaysia. Country factors such as culture may explain the inconsistency of the results in ASEAN.Abstrak: Penelitian ini mengeksplorasi karakteristik informasional dan oportunistik dari manajemen laba di negara-negara ASEAN. Manajemen laba akan berdampak pada kemampulabaan perusahaan. Hubungan positif antara manajemen laba dan kemampulabaan di masa depan mengungkapkan bahwa manajemen laba bersifat informasional. Sebaliknya, hubungan negatif antara manajemen laba dan kemampulabaan perusahaan di masa depan mengindikasikan bahwa manajemen laba bersifat oportunistik.Penelitian ini menggunakan data dari database OSIRIS. Empat ratus delapan puluh lima (485) perusahaan dari Filipina, Indonesia, Malaysia, Singapura, dan Thailand digunakan sebagai sampel. Penelitian ini berfokus pada dua jenis manajemen laba: (1) manajemen laba akrual dan (2)

The Effect of firm characteristics and good corporate governance characteristics to earning management behaviors

“…Characteristics of earnings management in south-east Asia countries (Indonesia, Philippine, Singapore, Thailand, and Malaysia) is not similar (Wardani & Kusuma, 2012). By focusing on accruals based earnings management and real earnings management, the researchers found out that real earnings management is less aggressive in Indonesia and Philippine compared to the others countries.…”

Substitution between accruals‐based and real activities earnings management of listed Thai firms

“…Moreover, the literature demonstrated evidence that AEM has a significant association with REM, both as the substitution and complementary methods, in different country, such as China, Japan, Taiwan, India, Germany, Canada, and America (Achleitner et al, 2014;Chen et al, 2012;Das et al, 2017;Lee & Swenson, 2011;Matsuura, 2008;Zhu et al, 2015). The study in Thailand by Wardani and Kusuma (2012) examined the influence of earnings management on future performance using 116 Thai firms listed in the period 2004-2009, and the result found that AEM is not affected by future performance; in contrast, managers use REM as a business strategy to achieve a better performance. However, there is still aa lack of the evidence that clearly reflects the relationship between AEM and REM in Thailand.…”

“…To study earnings management in Thailand, Wardani and Kusuma (2012) researched Thai firms listed during [2004][2005][2006][2007][2008][2009], and they found that AEM is not affected by future performance; in contrast, REM includes sale acceleration, overproduction, and discretionary expenses, as described by Roychowdhury (2006) and is used as a business strategy to achieve better performance. While a prior study found the effects of earnings management on the quality of financial reports, Intakhan and Ussahawanitchakit (2009) collected data from the Stock Exchange of Thailand (SET) by dividing earnings management into four categories, namely, unreasonable change in accounting policy, wealth transfer misrepresentation, information distortion, and corporate-based concern of accounting choice.…”

Determinants of Earning Management in the Financial Sectors

“…The independent variables in this research are Deferred Tax Expense, Current Tax Expense, and Asset Growth. The earnings management variable uses discretionary accrual (DAC) proxy, which is the calculation of the modified Jones model in 1991 (Wardani & Kusuma, 2012).…”