The Effect of Earnings Management Practice on Corporate Borrowing Capacity through Corporate Reputation

Setiawan, Andy; Hermawan, Ancella Anitawati

doi:10.2991/iac-17.2018.28

Cited by 3 publications

(3 citation statements)

References 8 publications

(20 reference statements)

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“…Concurrently, an excellent corporate reputation comes with its own set of benefits. It enhances a company's ability to negotiate more favourable terms for debt financing (Setiawan & Hermawan, 2018) and fosters heightened shareholder confidence (Runge, 2021). This, in turn, creates a conducive environment for the company to secure external funding, further reinforcing its financial position.…”

Section: Discussionmentioning

confidence: 99%

Corporate Reputation, Available Slack, And Financial Distress Risk

Aminatuzzuhro,

Indrawati,

Fitriani

2024

Jurnal Akuntansi

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The global COVID-19 pandemic and the associated economic recession have posed significant challenges for companies in Indonesia. Many companies have struggled to survive, leading to mass layoffs or bankruptcy. This study is motivated to research the financial factors (namely, company reputation and available slack) related to the risk of financial difficulties, using 1,699 observations from non-financial public companies in Indonesia from 2020 to 2022. The research was conducted using moderated regression analysis performed with STATA software. The research results indicate that company reputation is negatively related to the risk of financial difficulties, and available slack strengthens this relationship. These results were robustly tested using coarsened exact matching. This study provides information for companies and stakeholders on reducing the risk of financial difficulties by strengthening the company's reputation and available slack.

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Section: Discussionmentioning

confidence: 99%

Corporate Reputation, Available Slack, And Financial Distress Risk

Aminatuzzuhro,

Indrawati,

Fitriani

2024

Jurnal Akuntansi

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“…Decrease in earnings quality is costly to the firm when trade creditors, potential lenders, and investors find out that corporate managers are manipulating the numbers (Brealey et al, 1977;Dechow et al, 1996;Tang, 2009;Wittenberg-Moerman, 2008). Andy and Hermawan (2017) provided empirical evidence that earnings management practice has a significant negative association with corporate reputation, and corporate reputation has a significant positive association with corporate borrowing capacity. Hence, earnings management practice or bad earnings quality is associated with poor corporate reputation and thus diminished borrowing capacity.…”

Section: Discretionary Earnings Accrualsmentioning

confidence: 99%

CDS Channels of Influence on Discretionary Accruals

Cheng¹,

Lim

2022

Journal of Accounting, Auditing & Finance

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Existing studies indicated that firm debt holders can use the credit default swap (CDS) market to hedge their credit risk, and thus they would reduce their monitoring of the firms, leading to largely distressed firms shirking and increasing positive abnormal earnings accruals. Besides providing insurance, however, the CDS spreads also perform price discovery of credit risk information sought by trade creditors and potential lenders who are not protected. High absolute abnormal discretionary accruals or bad earnings quality, especially negative abnormal accruals, would lead adverse CDS price signals that are very costly to the firm. This compels the firm under nondistressed conditions to be able to improve cash holdings, cash flows, working capital, and earnings reporting quality. Our new results indicate that the channels of improvement in earnings quality are through a firm’s large accounts payable and low cash holdings related to trade credit exposures. In the longer run, this leads to higher profitability and improved firm value. Thus, the generation of public information via the CDS market reduces information asymmetry and can enforce greater discipline in discretionary accounts reporting.

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“…Family involvement in executives, such as family chief executive officers (CEOs), also considers the firms' reputation and credibility when executing the business strategy. As earnings management is a form of information misleading (Roychowdhury, 2006) and can reduce firms' reputation (Setiawan and Hermawan, 2018), family firms are less engage in earnings management (Achleitner et al, 2014;Ghaleb et al, 2020;Tian et al, 2018).…”

Section: Family Firmsmentioning

confidence: 99%

Managerial ability and real earnings management in family firms

Putra¹,

Mela²,

Putra³

2021

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Purpose This study aims to examine the effect of managerial ability on real earnings management (hereafter REM) in family firms. Design/methodology/approach The sample consists of 864 firms-years listed in the Indonesian Stock Exchange. REM is measured by abnormal activities. Managerial ability is measured by data envelopment analysis. Data analysis uses random-effect regression analysis. Findings Family firms reduce the possibility of higher ability managers to engage in REM. Compare to non-family firms, higher ability managers in family firms are more likely to engage in REM to improve future earnings. Research limitations/implications This research only uses efficiency score data envelopment analysis to measure managerial ability while the managerial ability is, by nature, multi-dimensional and unobservable. This research also does not find the role of professional Chief Executive Officer (hereafter CEO) in the family firms in REM behavior because does not consider the professional CEO motivation (e.g. compensation structure). Practical implications This research is expected to help family firms formulate managers' selection based on managerial ability. This research also is expected to help investors and creditors to put their funds in the family firms with higher ability managers that reduce earnings information distortion. Originality/value To the best of the author’s knowledge, this research is the first research that examines the managerial ability on REM in Indonesian family firms. This research also contributes to fil the findings gap in managerial ability and REM.

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The Effect of Earnings Management Practice on Corporate Borrowing Capacity through Corporate Reputation

Cited by 3 publications

References 8 publications

Corporate Reputation, Available Slack, And Financial Distress Risk

Corporate Reputation, Available Slack, And Financial Distress Risk

CDS Channels of Influence on Discretionary Accruals

Managerial ability and real earnings management in family firms

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