Abstract
The aim of the contribution is earnings management detection by using a model with the highest explanatory power, as well as verifying hypotheses about the existence of a statistically significant relationship between earnings management and country, as well as firm size within companies operating in the mining and quarrying sector in 2019 and 2018. Data were obtained from the Amadeus database. The sample contains 348 financial reports of companies from 2019 to 2017. Research is focused on V4 companies that have the sum of total assets higher than 2,000,000 EUR, as well as the sum of operating revenue is higher than 100,000 EUR. Three recommended models were used, namely the modified Jones model, Industry model, and Kothari model. The explanatory power of these models was tested by using several criteria. Based on the results, the modified Jones model was chosen for earnings management detection. According to the results, companies in the mining and quarrying sector in V4 use earnings management techniques to manage the profit. It is not possible to clearly determine in which direction they manage their profit more often. Different values were measured in the two observed periods. Based on the results, Czech and Slovak companies used earnings management techniques to increase their profit. On the other hand, Poland and Hungarian companies used earnings management techniques to decrease it. Very large as well as large companies used earnings management techniques to decrease their profit; medium-sized companies used earnings management techniques to increase it.
Highlights
The contribution deals with the phenomenon of earnings management focusing on the mining and quarrying sector within V4 countries
The aim of the contribution is earnings management detection by using a model with the highest explanatory power, as well as verifying hypotheses about the existence of a statistically significant relationship between earnings management and country, as well as firm size within companies operating in the mining and quarrying sector in 2019 and 2018
We focused mainly on the selected companies operating in the mining and quarrying sector
Summary
The contribution deals with the phenomenon of earnings management focusing on the mining and quarrying sector within V4 countries. During the initial developing period, hypotheses known as mechanistic hypotheses were created Based on these hypotheses, investors focused on the reported numbers, and they did not take into account differences in accounting choice and their impact on financial results. By author Ronen and Yaari, earnings management can be defined as a way of managerial decisions leading to a) not reporting the truth in the short-term, b) value-maximizing earnings. The accounting choice is influenced by manager's information on financial results reported in the future. The authors Dechow and Skinner (2000) defined three types of reporting according to the GAAP related to the earnings management techniques. The University of Zilina is one of the leading places where the topic of earnings management is published, thanks to the authors Valaskova (6), Durana (5), Kliestik (4), and Siekelova (3)
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