Effect Of Real Earnings Management Research Articles

The effect of environmental, social, and governance disclosure and real earning management on the cost of financing

AbstractThis study identifies if sustainable development practices measured through ESG information disclosure are related to stakeholder confidence, leading to a lower cost of debt and equity financing. We also investigate the possible moderating role of real earnings management. We apply a fixed effects panel data analysis to 1659 firm‐year observations of 177 European companies from 2010 to 2019. The results show that investors value ESG disclosure negatively and increase the cost of equity, whereas lenders value it positively and reduce the cost of debt. In addition, when the moderating effect of real earnings management is introduced, the effect of ESG disclosure on the cost of debt decreases, and the effect of ESG disclosure on the cost of equity is reinforced by increasing it. In the presence of real earnings management, investors and lenders seem to think companies use ESG disclosure to legitimise their practices or mislead financing providers.

The Role Of Capital Expenditure In Moderating The Effect Of Real Earnings Management And Accrual Earnings Management On Firm Value

This study aims to obtain empirical evidence on the effect of real earnings management and accrual earnings management on firm value moderated by capital expenditures, as well as using control variables in the form of company size, female directors and financial flexibility. The research method used in this research is panel data regression analysis with the research sample, namely all energy and raw goods sector companies listed on the Indonesia Stock Exchange during 2019-2022. The results of the study show that real earnings management has a negative effect on firm value. Meanwhile, accrual earnings management and moderating role do not have a negative effect on firm value. In addition, only firm size as a control variable has an effect on firm value

Corporate Governance Memoderasi Pengaruh Manajemen Laba Riil terhadap Nilai Perusahaan

This study aims to examine the effect of real earnings management moderated by corporate governance with five indicators, namely managerial ownership, independent commissioners, institutional ownership, audit committee and leverage on firm value. The population used in this study were all manufacturing companies listed on the Indonesia Stock Exchange in 2018-2021. The sampling technique in this study used purposive sampling method, obtained 72 samples in the study from 217 companies from 2018-2021. The data used in this study are secondary data obtained from the company's annual financial statements published by the Indonesia Stock Exchange (IDX) and can be accessed through the website www.idx.co.id. The analysis method used is the SEM-PLS test method using SmartPLS software version 4.0. The results showed that real earnings management has a negative and significant effect on firm value and corporate governance does not weaken the effect of real earnings management on firm value.

The role of real earnings management in the value relevance of accounting information in Indonesia

Purpose- One feature that should be integrated in financial statements to be relevant to decision-makers is the relevance of the information to the users. When the value and usefulness of accounting information used to gauge business financial performance are undermined by earnings management methods, problems arise. As a result, the information presented may deceive financial statement users about the corporation's financial performance. Because IFRS demands managerial judgment in the accounting process by definition, its adoption may even increase the chance for real earnings management (REM). This study aims to examine the impact of REM to the value relevance of accounting information before and after IFRS adoption. Methodology- The population was manufacturing companies listed on the IDX, with samples 230 firm year observations consists of one hundred fifteen firms year before adoption of IFRS and one hundred fifteen firms year after IFRS adoption. this study used firms’ abnormal levels of cash flows, production costs, and discretionary expenditures as proxies for real earnings management. Using a price model and panel data, the main result confirms that real-based earnings management has an impact on the value relevance of earnings and book value of equity before IFRS adoption, but has no effect after IFRS adoption. Findings- The findings revealed that prior to the adoption of IFRS, real earnings management was employed by companies that had higher earnings value relevance and lower equity book value relevance than companies that did not apply earnings management. After the adoption of IFRS, there is no significant effect of real earnings management on the value relevance of earnings and equity book value. Conclusion- The results show that investors believe that earnings are a signal from managers with the implementation of real earnings management prior to the adoption of IFRS, but after the adoption IFRS, they may not be able to do so. Keywords: Real earnings management, value relevance, accounting information, earnings, equity book value, JEL Codes: M40, M41, M49

The effect of real earnings management on earnings persistence and informativeness before and during COVID‐19

AbstractThis study examines the effect of real earnings management (REM) on earnings persistence and informativeness and also considered in the context of the COVID‐19 pandemic. REM is quantified by two aggregate metrics. The sample consists of 2256 firm‐year observations of listed companies in Vietnam from 2016 to 2021. We find evidence that REM is negatively associated with the persistence of earnings and its components, with REM affecting cash flows more strongly than accruals. We also find that REM limits the relationship between current earnings and future cash flows. Furthermore, when confronted with the COVID‐19 pandemic, the effect of REM on earnings quality does not improve.

The effect of real earnings management, fraud, and earnings informativeness, as the moderating variable, on investment efficiency

Research aims: This study aims to analyze the relationship between real earnings management, fraud, and earnings informativeness, as the moderating variable, on investment efficiency.Design/Methodology/Approach: The samples tested consisted of 333 observations in manufacturing companies during 2018-2020. The hypothesis testing used moderated regression analysis through Eviews-12.Research findings: The results uncovered that real earnings management with cash flow (EM_CFO), production (EM_PROD), and discretionary costs (EM_DISEXP) had a negative effect on investment efficiency, while fraud had a positive effect. Besides, earnings informativeness as the moderation variable only affected fraud on the investment efficiency. Theoretical contribution/Originality: This study used real earnings management with EM_CFO, EM_PROD, and EM_DISEXP as a transition approach from accrual earnings management. In previous studies, fraud was not directly examined on investment efficiency. Adding earnings informativeness as a moderation variable thus gives another perspective on the relationship between independent and dependent variables.Practitioner/Policy implication: The implication for the practitioner is to provide consideration for earnings management, fraud, earnings informativeness, and investment efficiency. From a policy’s view, this study can give an overview to Financial Services Authority (“OJK”) and Investment Coordinating Board (“BKPM”) to consider and know the important elements in the financial statements and encourage investment efficiency.Research limitation/Implication: The limitation is that the coverage of samples was only from the manufacturing industry. Exploring other sectors, extending the period, and deepening analysis is open for better research, including using other proxies in each variable. The implication is not only as additional literature but also can give the shareholders and management an overview of the investment’s decision-making.

PENGARUH MANAJEMEN LABA RIIL DAN PENGUNGKAPAN TATA KELOLA TERHADAP TAX AVOIDANCE

The purpose of this study is to obtain empirical evidence about the effect of Real Earnings Management and Corporate Governance Disclosure on Tax Avoidance on the manufacturing firms listed on the Indonesia Stock Exchange during 2017 – 2019. Sample was selected using purposive sampling method and the valid data was 128 samples companies. Data processing techniques using multiple regression analysis. This study used Statistical Package for the Social Sciences (SPSS) ver. 25 software and SmartPLS ver. 3.3.2 software. The result show that real earnings management have a positif influence on tax avoidance and corporate governance disclosure does not significantly influence tax avoidance. The implication of this study is the need to increase monitoring of real earnings management and corporate governance disclosure to avoid tax avoidance.

An analysis of the positive effect of real earnings management on financial performance

PurposeREM models infer abnormal levels of cashflow from operations (AbCFO), selling, general and admin (AbSGA) and production expenses (AbProd) are opportunistic, based on the supposition that engaging in real activities to meet current earnings targets (t) will negatively influence future performance (t+1). However, from a firm productivity perspective, cost reduction (via AbCFO, AbProd and AbSGA) is interpreted as an efficiency enhancing business strategy. This study therefore differentiates between (1) firms with ineffective management that have engaged in AbCFO, AbProd and AbSGA to achieve an optimal resource-cost mix to generate sales (REMF) and (2) firms with effective management that have not (OEF).Design/methodology/approachUsing a sample of Korean listed firms over the 2000–2016 sample period, the study utilizes data envelopment analysis to capture the capability of management to generate sales from resources that are directly under their control. The study then compares the incremental effect that managerial decision making can have on real earnings management (REM) and future firm performance (period t+1 to t+5).FindingsThe study makes two important contributions. First, consistent with the efficiency/productivity literature, but contrary to seminal REM studies, empirical results shows that AbCFO, AbProd and AbSGA improve firm performance in period t and t+1 (to t+5), demonstrating “REM” is not opportunistic by default. Second, OEF have higher financial performance compared to REMF, in periods t and t+1.Originality/valueThe study therefore invokes resource-based theory and data envelopment analysis to integrate managerial effectiveness (human capital) into REM modelling. The study therefore extends the basic REM residual model.

Pengaruh financial distress, manajemen laba riil and profitabilitas pada tax aggressiveness dengan komite audit sebagai variabel moderasi

This study aims to determine the effect of Financial Distress, Real Earnings Management and Profitability on Tax Aggressiveness with the Audit Committee as Moderating Variable. The population in this study are manufacturing companies in the Consumer Goods Industry sector in 2017-2021 which are listed on the Indonesia Stock Exchange (IDX). The data used is secondary data with sampling technique using purposive sampling method. Based on this method, of the 50 companies that make up the population, there are 20 companies that meet the sampling criteria for the five-year financial annual reporting period so that in total there are 100 samples. The analytical method used in this research is multiple regression analysis. The results of the analysis show that real earnings management and profitability have a positive effect on tax aggressiveness. Meanwhile, financial distress has no effect on tax aggressiveness. For the audit committee as a moderating variable can weaken the effect of real earnings management and profitability on tax aggressiveness. However, the audit committee cannot weaken the effect of financial distress on tax aggressiveness.

Pengaruh Manajemen Laba Riil terhadap Audit Fee: Studi Empiris pada Perusahaan yang Terdaftar di Bursa Efek Indonesia Tahun 2015-2019

This study aims to examine the effect of real earnings management (REM) on audit fees. This research was conducted on companies listed on the Indonesia Stock Exchange (IDX) in 2015-2019. The sample from this study was selected using purposive sampling technique that produces sample of 138 companies. The dependent variable of Audit fee is measured using the actual value of the audit fee divided by 100,000. REM as an independent variable is measured using Roychowdhury (2006) model which has been modified by Suksonghong and Amran (2020) which focuses on abnormal discretionary costs and abnormal production costs. The results of this study found that companies involved in REM activities carried out by client companies had a positive and significant effect on the audit fees paid to auditors.

The effect of real earnings management on the firm value :An applied study on a sample of industrial companies listed in the Iraqi Stock Exchange for the period (2011-2018)

The research aims to show the extent of the impact of managing real profits on the company's value in the Iraqi environment for the period from (2011-2018). On a sample of (12) Iraqi industrial companies. The real profit management was measured by the (Roy Chowdhury, 2006) model, while the company's value was measured by the Tobin's Q formula. Where investors build their investment decisions based on the net profit, and from this standpoint, company managers resort to manipulating profits in order to mislead investors and then influence their investment decisions. The study reached a set of conclusions, the most important of which is the existence of a positive and significant effect of managing real profits on the company's value. As for the recommendations, the most important of them are that company managers, before they get involved in managing for profits, should think about its results, especially the real ones. Although it has a positive impact on the value of the company in the short term. However, it has a very negative impact on the value of the company in the future. Thus, corporate directors and external auditors were exposed to the judiciary and the matter.

경영전략과 경영자의 과신성향 및 적자회피를 위한 실제이익조정

The purpose of this study is to examine the relationship between management strategy, manager's overconfidence and real earnings management decision-making under the earning management motive to avoid deficit, which Burgstahler and Dichev (1997) mentioned as an important profit reference point.
 The analysis results are as follows. First, it is verified that companies pursuing a leading management strategy are more actively carrying out real earnings management to avoid losses than analytical or defensive companies. This can be interpreted as the fact that companies pursuing a leading management strategy with a large amount of resources available for real earnings management, such as investment scale, are performing real earnings management in a situation to avoid losses than those that do not. Second, if the managers of companies implementing leading management strategies have a tendency to overconfidence, it appears that they are more actively carrying out real earnings management to avoid losses than those that do not. This means that when managers of companies adopting leading management strategies are overconfident, they underestimate the negative effects of real earnings management, so they are actively using real earnings management.
 It is expected that this study will be able to suggest to researchers that differentiated real earnings management preference can occur depending on business strategy and earnings management incentives. In addition, it is expected that it can be a basis for the management strategy to have a dominant effect on corporate decision-making rather than the manager's tendency.

Praktik Real Earning Management, Corporate Governance dan Nilai Perusahaan: Bukti Pada Industri Manufaktur di Indonesia

This study aims to examine the effect of real earnings management on firm value with corporate governance as a moderating variable. The data used in this study are manufacturing companies listed on the Indonesia Stock Exchange for the fiscal year ending December 31, 2015 to 2019. The data collection technique is purposive sampling and comes from secondary data both from the IDX and from the website of each company. The research hypotheses were tested using regression analysis. The results of the study prove that corporate governance can weaken the relationship between real earnings management and firm value. Meanwhile, the direct influence of earnings management on firm value was not found to have a negative relationship, but the results were positive. This research is expected to contribute to the development of theories related to earnings management behavior and corporate governance practices, namely agency theory. Other contributions can be used as input for investors in assessing the company, especially those related to the transparency of the company's financial reporting.
 Keywords: Abnormal Cash Flow From Operations; Corporate Governance; Firm Value; Agency Theory.

The Effect of Real Earnings Management on Economic Value Added: Listed Companies of Dubai Financial Market

Abstract: In this paper, we reviewed the impact of Real Earnings Management on the Economic Value Added. The real earnings management value was calculated for (52) companies listed on the Dubai Financial Market through (Sales Manipulation, Production Costs Manipulation, and Discretionary Expenses Manipulation), the period of study 5 years from 2014 to 2018, the results showed that companies practiced real earnings management activities in varying proportions. In addition, we calculated the economic value added without adjustments and with additional adjustments for all sample companies. To test the validity of the hypothesis, we used a regression analysis by applying the three empirical models. Through the results of the analysis, we accepted the alternative hypothesis it's mean we funded the negative effect of real earnings management on economic value added (negative significance) Keywords: Earnings Management, Real Earning Management, Economic Value Added

Crime rate, real earnings management and managerial ability

PurposeThis paper aims to examine the effect of managerial ability (MA) on real earnings management and the effect of real earnings management by higher ability managers on future profitability, at a different level of the crime rate.Design/methodology/approachThe research sample includes 864 manufacturing firms-years listed on the Indonesian Stock Exchange. MA uses an efficiency score by data envelopment analysis. Real earnings management is measured by abnormal activities. The crime rate is measured by logarithm natural of the number of crimes per 100.000 citizens in the region where the firm is headquartered. Data analysis uses fixed-effect regression.FindingsMA increases real earnings management in the region where the firm is headquartered with a higher crime rate while MA will reduce real earnings management in the region where the firm is headquartered with a lower crime rate. Also, real earnings management by higher-ability managers gives a signal of better future profitability in the region where the firm is headquartered with a lower crime rate.Originality/valueThis research contributes to filling the previous gap of managerial characteristics ability-related on real earnings management by providing regional crime rate as a determinant factor of managers’ ethical behavior. This research is the first one to considers the regional crime rate treatment to the relationship between MA and real earnings management especially in Indonesia. This research also provides new evidence of efficient real earnings management for a lower crime rate group of samples to give a signal of better future profitability.

The jinx of real earnings management: evidence from inefficient investments and debt maturity structure in Pakistan

PurposeThis study aims to investigate two important research questions. First, this research examines the impact of real earnings management on investment inefficiency of the non-financial listed firms in Pakistan. Second, this research further explores the moderating role of short-term debt on the nexus between real earnings management and investment inefficiency. This study attempts to highlight an important research problem i.e. the jinx of real earnings management from the context of an emerging economy.Design/methodology/approachThis study employs the data from non-financial listed firms in Pakistan over the period from 2008 to 2018. The study uses panel data methodologies with firm and year fixed-effects to examine the proposed hypotheses. The results are robust to the use of sensitivity analysis, different estimation techniques and endogeneity issues (using two-stage least squares (2SLS) and generalized method of moments (GMM) techniques).FindingsThe results of the research are twofold. First, consistent with the theoretical arguments, the findings reveal that real earnings management increases investment inefficiency and results in over-investments by the firms. Second, short-term debt attenuates the relationship between real earnings management and investment inefficiency. It implies that a higher level of short-term debt weakens the adverse effects of real earnings management on the investment efficiency of the firm.Originality/valueThis study offers original findings on the issues pertaining to the quality of accounting and financial reporting in an emerging economy like Pakistan, where the implementation of regulations is weak in the corporate world and management frequently exploits shareholders' wealth for the short-term benefits.

Real earnings management and borrowing costs: The moderating effect of the directors’ and officers' liability insurance

Abstract The purpose of this paper is to investigate the effects of real earnings management on firm borrowing cost of public-listed in Taiwanese manufacturing industry during 2010 to 2017, and also examines the moderating effect of the directors’ and officers’ liability insurance (D&O insurance) on real earnings management and borrowing costs. The empirical results show that borrowing cost is positively related to real earning management but negatively related to D&O insurance purchase. Therefore, the firms with D&O insurance than those without have lower borrowing costs, but the higher the D&O insurance amount, the higher the borrowing costs. Furthermore, D&O insurance has a moderating effect between the real earnings management and borrowing costs. Our findings suggest the relationship between D&O insurance and real earning management, which through the D&O insurance purchasing decision to impact on corporate borrowing costs. JEL classification numbers: G22, G32, M41. Keywords: Real earnings management, Directors’ and officers' liability insurance, Borrowing costs, Moderating effect.

Effect of Real Earnings Management on Firm Performance: Evidence from India

This study investigates the effect of real earnings management (REM) on firms’ future performance in India. The sample comprises a balanced panel of 108 non-financial firms belonging to 21 industries (as per the two-digit NIC classification code) from 2006 to 2018. The proxy for REM given by Roychowdhury (2006) is used to measure REM, and the firm’s performance is measured through return on assets (ROA), return on equity (ROE) and price-to-earnings (PE) ratio. While ROA and ROE are measures of accounting performance, PE captures market performance. To explore the impact of REM activities on firms’ future performance, a Generalized method of moments (GMM) estimator is used in a dynamic panel setting. Since the proxy variables for performance is measured on a lead year basis, the analysis is restricted to the period 2006–2017. We also control for firm size, financial stability and growth. Our research reflects that Indian firms usually manipulate earnings by reducing discretionary expenditures. Regression results indicate that REM activities affect both accounting and market performance negatively.

Ignorance is Bliss: Effects of Real Earnings Management by Rank-and-File Employees and the Role of Managers

Ignorance is Bliss: Effects of Real Earnings Management by Rank-and-File Employees and the Role of Managers

Earnings Management, Enterprise Scale and Enterprise Value—Research Based on Data and Statistical Analysis Tools

This paper takes China’s A-share listed companies in Shanghai and Shenzhen Stock Exchange from 2012 to 2016 as samples to analyze the impact of earnings management on current and subsequent enterprise value. It is found that real earnings management not only affects the current value, but also damages the long-term value of enterprises continuously. Further research finds that the size of the firm has a moderating effect, that is, the larger the size of the firm, the damage effect of real earnings management on the firm value is mitigated.