Stock Market Information and REIT Earnings Management

Ambrose, Brent W.; Bian, Xun

doi:10.1080/10835547.2010.12091271

Cited by 22 publications

(18 citation statements)

References 46 publications

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“…The Type 3 REM can be measured by abnormal revenue and abnormal cost of goods sold (COGS). COGS in the context of REITs stands for expenses associated with property rental and operating activities (Edelstein et al , 2007; Ambrose and Bian, 2010). Thus, abnormal COGS can be used as a measurement of REM by manipulating expenses associated with rental property activities and operating management.…”

Section: Methodology Of Estimating Em Measurementsmentioning

confidence: 99%

“…Thus, the variable Time , which is equal to the difference between the fiscal year and the year “2000”, is also included as a control variable. In addition, variables describing the corporate governance characteristics, ownership structure, and idiosyncratic stock price volatility are included as control variables according to the papers of Anglin et al (2012), Devos et al (2013), and Ambrose and Bian (2010). The idiosyncratic stock price volatility is estimated by using weekly returns of each firm-year observation (Ambrose and Bian, 2010).…”

Section: Methodology Used To Test the Impacts Of The Gfc On Emmentioning

confidence: 99%

“…First, investors, auditors, and regulators on the market should have become more cautious when interpreting the disclosed financial information. The research of Ambrose and Bian (2010) implies that the financial disclosure behavior of listed corporations is influenced by the reaction of the market. Thus, listed corporations should have employed more conservative financial disclosure strategies when the market becomes more cautious in the interpretation of the disclosed financial information following the GFC.…”

Section: Findings and Implicationsmentioning

confidence: 99%

See 2 more Smart Citations

How the 2007 global financial crisis changed the financial disclosure behavior

Liang

Dong

2018

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Purpose The purpose of this paper is to investigate how the 2007 global financial crisis (GFC) changed financial disclosure behavior using a sample of US equity real estate investment trusts (REITs) from 2000 to 2015. Design/methodology/approach The authors use panel data spanning from 2000 to 2015 to examine the impact of the GFC on REITs’ earnings management (EM) after controlling for other factors (including the market shock in 2007 and 2008). The measurements of EM are estimated by using the models developed from literature such as modified Jones models. The static panel data regression models are used to estimate the impact of GFC on the REITs’ EM. Findings The authors find that REITs are more likely to engage in income-increasing EM to embellish their financial reports during the GFC. However, the magnitude of the use of EM to manipulate disclosed financial information decreased following the GFC, indicating an improvement in the quality of financial disclosure as a consequence of the enhancement of the regulatory environment. REITs also changed the manner in which their EM behavior responded to the main factors in the market following the outbreak of GFC. Research limitations/implications This study contributes to the finance and accounting literature by providing the first empirical test results concerning how the financial disclosure behavior and quality of listed portfolios and companies such as REITs have changed corresponding to the enhancement of the regulatory environment and adverse market conditions brought by GFC. Practical implications This study provides references for investors, auditors, and regulators to help them make adjustments for and improve the interpretation of the disclosed financial information. Originality/value This is one of the first empirical study testing the impact of the GFC on EM. It is also the first empirical study investigating the impact of GFC on the financial disclosure behavior of REITs.

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Section: Methodology Of Estimating Em Measurementsmentioning

confidence: 99%

Section: Methodology Used To Test the Impacts Of The Gfc On Emmentioning

confidence: 99%

Section: Findings and Implicationsmentioning

confidence: 99%

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How the 2007 global financial crisis changed the financial disclosure behavior

Liang

Dong

2018

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“…They find that within the UK market the likelihood of upward earnings management is significantly greater in the former case than the latter, though both are drivers for earnings management. Additionally, using a sample of real estate investment trusts (REITs) from the database during 1990-2006, Ambrose and Bian (2010) discover a link between stock price movement and REIT earnings management. They find that share price can be a motivation for manipulating earnings management.…”

Section: Capital Market Expectationsmentioning

confidence: 99%

The perception of earnings management motivations in Saudi public firms

Habbash

Alghamdi

2015

Journal of Accounting in Emerging Economies

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Purpose – The primary purpose of this paper is to investigate the motivations of earnings management in less-developed economy using Saudi listed companies. Design/methodology/approach – While numerous motivations for earnings management are proposed in the literature, many of these motivations have inconsistent empirical support. A number of studies report discontinuities in the distribution of earnings around benchmarks such as the zero profit level. However, the evidence regarding whether these discontinuities are associated with earnings management behaviour is still uncertain. In addition, evidence regarding the ability of various governance mechanisms to constrain earnings management is also mixed. These issues raise the necessity to investigate managers behaviour that incentivise earnings management practices through qualitative research approach. A questionnaire survey and interviews are mainly used to explore the motivations for earnings management in Saudi Arabia in order to obtain the different perceptions of respondents. Findings – The findings reveal that the four main incentives for Saudi managers to manage earnings are “to increase the amount of remuneration”, “to report a reasonable profit and avoid loss”, “to obtain a bank loan” and “to increase share price”. Research limitations/implications – Hence, agency-institutional theory may provide a sensible explanation for earnings management practices in Saudi Arabia. Practical implications – Previous findings could be helpful for external auditors and regulators and legislators in their attempts to constrain the incidence of earnings management and enhance the quality of monitoring mechanisms. Originality/value – While numerous motivations for earnings management are proposed in the literature, many of these motivations have inconsistent empirical support. A number of studies report discontinuities in the distribution of earnings around benchmarks such as the zero profit level. However, there is no evidence that these discontinuities are associated with earnings management behaviour. In addition, evidence regarding the ability of various governance mechanisms to constrain earnings management is also mixed. These issues raise the necessity to investigate managers behaviour that incentivise earnings management practices through qualitative research approach.

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“…This paper therefore aims to shed light on the switching effect for REITs by offering a unique framework for testing such a signalling effect due to the high opacity of real estate investments that may affect access to the debt/equity market. The use of the REIT market for analysis is particularly interesting because this type of real estate investment vehicle is legally compelled to distribute a large percentage of earnings and so there is incentive for REITs to adopt earning management solutions in the event that there is a lack of liquidity (Ambrose and Bian, 2010). The incentive to adopt an earning management policy reduces the quality of information available on the balance sheet for less sophisticated investors (Deng and Ong, 2018) and maximizes the usefulness of the certification effect related to selecting the best syndicated consortium for new capital raising solutions.…”

Section: Introductionmentioning

confidence: 99%

International Real Estate Review

Gibilaro¹,

Mattarocci²

2018

IRER

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Real estate investment trusts (REITs) frequently collect new financial resources by issuing new shares and bonds or requesting for new loans to finance their investment policy. Due to the low transparency of the market, the success and the cost of financing are significantly affected by the reputation and the guarantee offered by the syndicated consortium. International evidence suggests that the decision to change syndicated banks could impact the success of raising new capital for industrial and financial firms, but there is no concrete evidence which suggests that this is the case in the real estate industry. The paper considers a representative sample of US REITs to examine the frequency of switching decisions in the industry and their relationship with leverage policy. The empirical analysis demonstrates a greater likelihood of creating a new financing consortium when a REIT is poorly performing and the average interest rate is increasing. Moreover, the switching strategy is more frequently adopted when the REIT is planning to increase leverage and the current level of leverage is still far from the target value. Results obtained are robust with respect to the new consortium definition and the initial public offering (IPO) effect.

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Stock Market Information and REIT Earnings Management

Cited by 22 publications

References 46 publications

How the 2007 global financial crisis changed the financial disclosure behavior

How the 2007 global financial crisis changed the financial disclosure behavior

The perception of earnings management motivations in Saudi public firms

International Real Estate Review

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