The Impact of Environmental and Social Costs Disclosure on Financial Performance Mediating by Earning Management

Research background: From a research perspective, it is very important to point out motives and used techniques of earnings management because it allows better identify the factors that drive the decision to practice earnings management. Motives of earnings management can be organized thematically into contractual obligations, asset pricing, or influencing external parties which are carried out through the use of various earnings management techniques. Purpose of the article: The article aims to identify all possible motives leading to the practice of earnings management in companies in a global environment and to point out the individual techniques of earnings management, which are used to realize the individual motives. Methods: The method of description and the method of classification of technical terms are used to specify in more detail the motives and techniques of earnings management used in the global environment. Findings & Value added: In a global environment exist strong motives for managers to practice earnings management. These motives include better pricing of securities, beating analysts’ expectations, avoid negative earnings, show better performance than past, better compensation of managers, tax evasion, external finance attraction, concealment of poor performance, favorable contracts from suppliers, customers, lenders, and employees and avoiding technical default on debts covenants. Another dimension of earnings management is the stress level of managers builds up due to expectations of better performance by stakeholders. In a global environment, there are several techniques used to practice motives leading to earnings management. These techniques are described in more detail in the article.

Section: Political Costsmentioning

confidence: 99%

“…Companies in a global environment have the opportunity to buy shares from other companies to invest excess funds or to achieve a specific strategic alliance. [14] An enterprise can manage profits by investing in marketable and available-for-sale securities.…”

Section: Flushing Investing Portfoliomentioning

confidence: 99%

Motives and techniques of earnings management used in a global environment

Straková

2021

“…In this study, M-score revealed 71 % of the most significant financial reporting scandals. Some authors argue [8,9,10], that detecting companies which manipulate their financial statements can be beneficial for the parties concerned -for an investor in the form of increased returns, avoidance of costly litigation for an auditor, and avoidance of damaging reputations for an analyst. The aim of the scientific work was to provide information on the frequency of earnings management in enterprises, analyse the companies where the manipulation was detected and also to identify the determinants of these manipulations.…”

Section: Literature Reviewmentioning

confidence: 99%

Beneish M-score: A measure of fraudulent financial transactions in global environment?

Valášková

Fedorko

2021

Research background: Earnings is a source of information for capital owners, potential investors, competitors, customer and supplier of the company. Managers have the direct motivation and knowledge and use adequate techniques to adjust legally the reported earnings to meet the specific requirements of the company and achieve stable financial results. Thus, earnings management is currently the most provocative and highly topical issue in the field of finance and accounting at the global perspective. Purpose of the article: The main purpose of the paper is to detect the manipulation with earnings in a specific sector of economy, following the global principles of financial reporting, and to reveal the degree of manipulation of enterprises in the selected countries of the Visegrad grouping. Methods: The model of Beneish M-score is applied using the sectoral data and compares the level of manipulation in the period 2015-2019. The Beneish model is a mathematical-statistical model that uses financial ratios calculated with accounting data of a specific enterprise aimed to detect if an enterprise is likely that the reported earnings of the company were manipulated. Findings & Value added: The paper monitors the development of the manipulation with earnings in the given sector (enterprises tend to manage earnings upwards), and analyses the influences of macroeconomic factors on the phenomenon of earnings management. The detection of earnings management by M-score helps protect business partners of an enterprise against fraudulent behaviour, especially in the global environment.

“…[12] add technology-related behaviours and attitudes. [13] investigate the effect of environmental cost disclosure and social cost disclosure on financial performance SHS Web of Conferences 9 2, 0 (2021) Globalization and its Socio-Economic Consequences 2020 2015 https://doi.org/10.1051/shsconf/20219202015 mediated by earning management. To achieve this purpose, a quantitative research method is run by smart Partial Least Squares.…”

Section: Literature Reviewmentioning

confidence: 99%

Earnings management: Local or global phenomenon in the Visegrad Four?

Ďurana

Bačík

2021

Research background: Increasing number of national scientific studies related to business finance shows that the earnings management phenomenon as a legal apparatus of manipulation business profit plays a significant role in financial reports in conditions of Slovak economy. Slovakia belongs to Visegrad Four, group of very historically and developmentally close countries. That is why it is relevant to compare the issue of earnings manipulation it these countries’ context. Purpose of the article: The main purpose of the article is to confirm global approach to manipulation of earnings in the Visegrad Four’s enterprises and justify that managers incline to earnings management systematically in all analysed group not only at a local level in chosen country. Methods: This econometric investigation used the observations of earnings before interest, taxes, depreciation and amortization of 1,058 Slovak enterprises, 688 Czech enterprises, 1,376 Polish enterprises and 731 Hungarian enterprises. It was investigated nine-years period from 2010 to 2018. Non-parametric time series trend modelling was run by Mann-Kendall test and estimation of the slope of the trend by Sen’s method used a linear model. Findings & Value added: The article focused on nine-years development of earnings before interest, taxes, depreciation and amortization in the Visegrad Four’s enterprises. It was found out the systematic trend manipulation in all analysed countries. This fact highlighted that earnings management is not local phenomenon, but its development is globally preferred tool of business finance.