The role of corporate governance in shaping accruals manipulation prior to acquisitions

Lehmann, Nico

doi:10.1080/00014788.2015.1116969

Cited by 18 publications

(18 citation statements)

References 57 publications

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“…Such firms with weak financial standing can be gauged based on their cash flow position which is considered as the main trustworthy indicator relied by most investors subsequent to era of accounting debacles (Mulford & Comiskey, 2005). Furthermore Lehmann (2016) found that firms with strong corporate governance were aggressively involved in earnings manipulation compared to firms with weak governance due to corporate governance role which pressure management to act in shareholders' interest. In addition, similar case can be observed in Satyam scandal where despite being awarded with numerous accolades for outstanding governance and corporate accountability, its management was caught committing financial statements fraud (Agrawal, 2009).…”

Section: Binary Logistic Regression Results For Corporate Governanmentioning

confidence: 99%

Management Fraud Propensity Factors, Governance Interactions and Earnings Manipulation: a Case of Malaysian Public Listed Companies

Kamal*¹,

Salleh²,

Ahmad³

2019

IJRTE

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This study aims to determine Management Fraud Propensity Factors of Fraud Triangle and International Standards on Auditing no: 240 (ISA 240) relationship with earning manipulation. It also examines potential moderating effect of Corporate Governance, measured by index as proxy to opportunity on relationship between Management Fraud Propensity Factors and Earning Manipulation. Samples of this study consisted of 504 firm-year observations comprising of 252 earnings manipulating firms matched with 252 non-earnings manipulating firms based on industry, year and size. Corporate governance disclosure was measured using corporate governance index (CGI), replicated from ASEAN Corporate Governance Scorecard (ACGSC) components. Management fraud propensity factors (pressure/ incentives, opportunity, rationalization/ attitude) were examined using logistical regression to assess relationship with earnings manipulation. This study is unique as it utilised CGI as proxy for opportunity, replacing limited numerous governance attributes commonly used argued for deficiency in portraying existing linkage within corporate governance ecosystem. CGI was also tested on its potential moderating effect on relationship between management fraud propensity factors (pressure/ incentives; rationalization/ attitude) and earnings manipulation, in line with Agency Theory. Results revealed management fraud propensity factors of pressure/incentives (recurring negative cash flows from operation, rapid growth, unusual profitability, need for financing), opportunity (corporate governance index) and rationalisation/attitudes (management interest on earnings trend) significantly related with earnings manipulation. Contradictory to expectation, CGI also showed significant positive interaction on strengthening relationship between pressure-related fraud propensity factors due to recurring negative cash flows from operations and earnings manipulation. Possible explanation is firms with strong corporate governance but experiencing weak financial standings are constantly pressured by shareholders to meet their interests which driven management to manipulate profit. This study provides tools to regulators to stay vigilant of firms with characteristics of potential earnings manipulation engagement and useful in providing insights to shareholders for selecting stocks not prone to earnings manipulation.

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Section: Binary Logistic Regression Results For Corporate Governanmentioning

confidence: 99%

Management Fraud Propensity Factors, Governance Interactions and Earnings Manipulation: a Case of Malaysian Public Listed Companies

Kamal*¹,

Salleh²,

Ahmad³

2019

IJRTE

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“…3.1.4.4. F&A stock-for-stock e governança corporativa Lehmann (2016) investigou o papel da governança corporativa no EM por accruals antes de F&A stock-for-stock. Em contraste com as alegações comuns de que governança corporativa forte restringe o EM por accruals, Lehmann (2016) mostra que os adquirentes com forte governança se envolvem mais agressivamente na manipulação para aumento de lucro do que aqueles com fraca governança.…”

Section: Fanda Stock-for-stock E Desdobramento De Açõesunclassified

“…F&A stock-for-stock e governança corporativa Lehmann (2016) investigou o papel da governança corporativa no EM por accruals antes de F&A stock-for-stock. Em contraste com as alegações comuns de que governança corporativa forte restringe o EM por accruals, Lehmann (2016) mostra que os adquirentes com forte governança se envolvem mais agressivamente na manipulação para aumento de lucro do que aqueles com fraca governança. Os resultados são robustos aos diferentes modelos de accruals discricionários, às diferenças na estrutura de crescimento da empresa, às variáveis de controle, a um grupo de controle de 100% de adquirentes por meio de caixa, aos retornos anormais de longo prazo (buy-and-hold) e a possíveis problemas de seleção amostral.…”

Section: Fanda Stock-for-stock E Desdobramento De Açõesunclassified

“…Os resultados são robustos aos diferentes modelos de accruals discricionários, às diferenças na estrutura de crescimento da empresa, às variáveis de controle, a um grupo de controle de 100% de adquirentes por meio de caixa, aos retornos anormais de longo prazo (buy-and-hold) e a possíveis problemas de seleção amostral. Lehmann (2016) esclarece que outras formas de EM (por exemplo, REM) podem tornar-se mais importantes no longo prazo como substitutos do EM baseado em accruals. Para esse autor, futuras pesquisas poderiam abordar F&A relacionadas com determinantes da manipulação de accruals em mais detalhes para obter compreensões mais abrangentes dos incentivos econômicos subjacentes ao EM antes de F&A stock-for-stock.…”

Section: Fanda Stock-for-stock E Desdobramento De Açõesunclassified

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Fusões, Aquisições e Gerenciamento de Resultados: uma revisão sistemática envolvendo diferentes categorias analíticas

Bispo

Maia

Barros

et al. 2017

ROC

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O objetivo geral foi realizar uma revisão bibliográfica sistemática nos artigos disponíveis na base Web of Science que pesquisaram o gerenciamento de resultados (EM) concomitante às transações de Fusões e Aquisições (F&A). Especificamente: i) verificar quais foram as principais discussões sobre o tema; ii) criar categorias analíticas para ordenar as discussões; e, iii) elaborar uma síntese do conhecimento existente sobre o assunto. A amostra envolveu 40 artigos registrados entre os anos de 1945 e nov/2016. Foi utilizado o método de revisão bibliográfica sistemática para a análise de conteúdo qualitativa. As estratégias de busca utilizaram rótulos de campo e operadores boolianos com expressões definidas a priori. Os resultados apontam 11 categorias analíticas e, pelo menos, 43 elementos essenciais inerentes a essas categorias. Grande maioria dos resultados mostra que há interesse na utilização do EM próximo aos anúncios e efetivação das F&A. Diversos pesquisadores analisaram o EM voltado para manipulação dos accruals no sentido de elevar o lucro. Outros, em menor quantidade, introduziram a importância de verificar as manipulações de atividades reais com base na DFC. Trabalhos futuros poderiam relacionar information asymmetry com as transações de F&A e as potenciais interferências do EM, tanto por accruals quanto por atividades reais.

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“…Our data show that, if a researcher wishes to investigate the Italian capital market, which is the smallest in our study but one of the largest in the EU, they will estimate AAs for only 43% of the potentially available observations using the 2SICy approach. In response, either an industry classification wider than the two-digit SIC code is used to estimate the accruals models cross-sectionally (e.g., Athanasakou et al, 2009;Gore et al, 2007;Lapointe-Antunes, Cormier, Magnan, & Gay-Angers, 2006;Lehmann, 2016;Sáenz González & García-meca, 2014;Saleh & Ahmed, 2005;Simpson, 2013;Van Tendeloo & Vanstraelen, 2008) or alternative techniques are employed to identify AAs (e.g., Capalbo, Frino, Mollica, & Palumbo, 2014;DeFond & Park, 2001;Francis & Wang, 2008;Ittonen, Johnstone, & Myllymäki, 2015;Jansen, Ramnath, & Yohn, 2012;Zerni, Haapamäki, Järvinen, & Niemi, 2012).…”

Section: Industry-based Estimation Approaches Versus the MIX Approachmentioning

confidence: 99%

Estimating accruals models in Europe: industry-based approaches versus a data-driven approach

Narzo¹,

Freo

Mattei

2018

Economic Research-Ekonomska Istraživanja

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Accruals models have been estimated using a variety of approaches, but the industry-based cross-sectional approach currently seems to be the standard method. This estimation approach cannot be easily used in the vast majority of European countries where several industry groups do not have sufficient yearly observations. Using data from France, Germany, Italy and the UK, we artificially induce earnings manipulations to investigate how the ability to detect those manipulations through accruals models is affected by the use of different industry classifications. Moreover, we propose an alternative estimation approach based on a data-driven statistical procedure that provides an optimal choice of estimation samples. Our analyses show that enlarging the industry classification and/or pooling observations across years reduces the probability of discovering earnings manipulations but allows for the estimation of abnormal accruals (AA) for more firms. The data-driven approach, however, in most cases outperforms the industry-based estimation approaches without sample attrition. This result suggests that there is still ample room for improving the accruals model estimation process for capital markets of European countries. Furthermore, the analysis documents which accruals model outperforms the others in each of the four countries and the probabilities to detect earning management in a high variety of circumstances.

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The role of corporate governance in shaping accruals manipulation prior to acquisitions

Cited by 18 publications

References 57 publications

Management Fraud Propensity Factors, Governance Interactions and Earnings Manipulation: a Case of Malaysian Public Listed Companies

Management Fraud Propensity Factors, Governance Interactions and Earnings Manipulation: a Case of Malaysian Public Listed Companies

Fusões, Aquisições e Gerenciamento de Resultados: uma revisão sistemática envolvendo diferentes categorias analíticas

Estimating accruals models in Europe: industry-based approaches versus a data-driven approach

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