Proxy For Management Research Articles

The Active Versus Passive Investing Debate: Evidence From the 2018-2023 Market Cycle

The paper investigates the research question: Which investment management style, active or passive, produced better risk-adjusted performance from January 1, 2018, to December 31, 2023 (Prondzinski, 2010)? The comprehensive time period was further subdivided into two periods: January 2020 – May 2023, the Pandemic period, and March 2022 – December 2023, the interest rate hiking period without any interest rate cuts. The study tested twenty-seven hypotheses derived from this research question for the specified periods addressed. The study, consisting of 27 statistical tests, found that on a risk-adjusted basis, the Sharpe ratios of active indices (proxies for active management) significantly exceeded the passive indices (proxies for passive management) in nine of the periods tested) (Prondzinski, 2010).

The Impact of Covid-19 on Earnings Management: Empirical Evidence from Vietnam

Earnings management (EM) is the practice of adjusting profits or earnings on financial statements at the discretion of the management. This study undertook a regression analysis of the earnings management model, with data from 300 non-financial listed companies on the Vietnamese stock exchange during the period 2016 to 2021 to determine whether the COVID-19 pandemic has had an impact on earnings management. To estimate earnings management, compared with the original model, we add the leverage variable (LV) was used as earnings management proxy in this research. The results show that the COVID-19 pandemic positively and significantly impact the earnings management of non-financial listed companies. Moreover, it was found that managers are more involved in real earnings management than accrual earnings management, implying that financially distressed firms need to reassure investors to raise more capital during the pandemic. However, there is no evidence of a trade-off between these two techniques during the pandemic compared to before the pandemic. Additionally, this study provides evidence that the model by Roychowdhury, following Cohen et al., and the performance-matched model by Jones, following Kothari et al. are more suitable for detecting EM behavior when factoring in the financial leverage (LV) variable for firms with a high debt ratio in developing countries. JEL Classification: H8, M42

The effect of credit risk management on the financial performance of commercial banks: evidence from Tanzania

The vital role played by commercial banks in economic development calls for the stable and sustainable financial performance of banks for smooth financial intermediation. However, unhealthy credit has caused the collapse of many financial institutions all over the world. Therefore, this study examines how credit risk management practices affect the financial performance of commercial banks in Tanzania. While employing multiple linear regression techniques, the study analysed balanced panel data from 225 observations gathered from audited published annual reports of 15 commercial banks in Tanzania from 2006 to 2020. Credit risk approval and credit risk monitoring were used as proxies for credit risk management. The findings reveal that credit risk approval has a positive effect on banks’ capital adequacy, efficient utilisation of equity, asset quality, and liquidity. However, credit monitoring negatively affects the financial performance of banks through their earning ability, asset quality, and liquidity. The study recommends that incorporating credit risk management practices as a core aspect of bank operations is crucial, as it has a beneficial impact on financial performance. Nevertheless, it is advised to exercise caution and achieve a harmonious balance in the integration and concentration of all examined variables since credit approval could not exhibit a positive effect on banks’ earning ability. This has also been established on credit monitoring towards capital adequacy and efficient use of equity.

Does Working Capital Management Affect Financial Performance: Empirical Evidence of Indian Manufacturing Sector?

This research aims to analyse the Working Capital Management affects financial performance in Indian manufacturing sector. This research employs secondary data for data collecting from BSE, which comprises 20-year financial data from 2003 to 2022 using the sample of 419 companies. The study used descriptive statistics, random effects, and fixed effect models to define the sample and evaluate the influence of working capital management on manufacturing industry. Findings suggested that working capital management proxies have a major impact on the financial performance of the company. Proxy of CCC indicates that negative and significant impact of GOP, NPM, and NPR. The coefficient of ICP indicates that negative and significant relation between firm performances. In addition, we discovered a statistically significant inverse relationship between APP and GOP and NPM and NPR, suggesting that the more quickly a company in our sample pays its bills, the less profit it generates. The above table demonstrates that RCP has a positive and significant alliance with GOP. To the best of the author’s knowledge, this paper provides the study to examine the WCM’s effect for firm’s performance and contributes valuable insights on this company’s investors and managers.

Does the CEO’s entrenchment affect the financial communication quality? Empirical evidence from France

Research Question: What is the impact of the CEO’s entrenchment on the financial communication quality in the French context? otivation: In fact, it is important to study the different characteristics of the CEO, which can facilitate the entrenchment and their effect on the quality of financial communication in the French context. Idea: The purpose of this paper is to investigate the impact of the CEO’s entrenchment on the financial communication quality examined by the discretionary accruals. Data: Our sample is made up of 335 companies listed on the CAC All Tradable index for the period from 2011 to 2020. However, we have excluded some financial companies due to their atypical behavior in financial reporting, firms with insufficient annual reports and firms with insufficient data about the CEO’s entrenchment. Therefore, the final number of firms used in this study was 151 over ten years, producing a total of 1510 firm-year observations. Tools: Our regressions will be estimated by the feasible generalized least squares (FGLS) method. Findings: Using the discretionary accruals, as a proxy for the earnings management, we obtained results from the Kothari et al. (2005) model, which indicates that there is a significant positive relationship between the CEO’s duality, ownership and the quality of financial communication, while there is no significant relationship between the CEO’s turnover and the financial communication quality. Contribution: This research is a contribution to the literature by demonstrating how the CEOs' entrenchment enables them to manipulate the accounting results to improve their financial situation.

Unexpected management forecasts and future stock returns

AbstractThis study investigates the effect of managerial discretion regarding initial earnings forecasts on future stock returns for Japanese firms. We estimate the unexpected portion of initial management earnings forecasts (“unexpected forecasts”) based on the findings of fundamental analysis research and define it as a proxy for forecast management. Using this measure, we find that firms with higher unexpected forecasts are related to negative abnormal returns over the subsequent 12 months. By contrast, the expected portion of earnings forecasts is not related to future abnormal returns. These results suggest that the market tends to appropriately price the credible portion of management forecasts, while overpricing the less credible portion. Further analysis reveals that the relationship between unexpected forecasts and future returns is (1) distinct from accruals anomaly, notably (2) in the 6‐month return window, (3) in the first half of the sample period (especially in 2005 and 2006), (4) in extreme unexpected forecast news and (5) in a poor information environment. This study extends the literature by focusing on a more desirable research setting in Japan, compared to other studies, to explore management forecasts and present new implications for the market pricing of management earnings forecasts.

Earnings management, investor sentiment and short-termism

PurposeThis study examines the investment horizon influence, mediated by market optimism, on earnings management based on accruals and real activities. Based on short-termism, the authors argue that earnings management increases in optimistic periods to boost corporate profits.Design/methodology/approachThe authors analyzed non-financial Brazilian publicly traded firms from 2010 to 2020 by estimating industry-fixed effects of groups of short- and long-horizon firms to compare their behavior on earnings management practices during bullish moments. For robustness, the authors used alternate measures and trade-off analyses between earning management practices.FindingsThe findings indicate that, during bullish moments, companies prioritize managing their earnings through real activities management (RAM) rather than accruals earnings management (AEM), depending on their time horizon. The results demonstrate the trade-off between earnings management practices.Research limitations/implicationsThis study presents limitations when using proxies for earnings management and investor sentiment.Practical implicationsInvestors and regulators should closely monitor companies' operations, especially during bullish market conditions to prevent fraud.Originality/valueThe study addresses investor sentiment mediation in the earnings management discussion, introducing the short-termism approach.

The Effectiveness of The Board of Directors' Performance and The Moderation Effect of Corporate Risk Management on The Company's Financial Performance

Purpose – This study aims to analyze the relationship between variables of the Board of Directors (BOD) effectiveness, specifically board size, board independence, and gender with the financial performance of companies measured through Tobin’s Q. The study also considers the role of the chief risk officer as proxy for enterprise risk management (ERM) as moderating variable.
 Research Method – The data used is sourced from the financial reports of LQ45 listed companies on the Indonesia Stock Exchange for the period 2018-2022 with a total of 44 companies as the sample. The analytical method employed is multiple linear regression using the Eviews software.
 Findings – The results indicate that board gender and board independence have negative significant effect on Tobin’s Q, while board size has no significant effect. The result of regression test with moderating variables show that the enterprise risk management as a moderating variable has significantly effect of board independence on Tobin’s Q.
 Implication – The existence board of director has an important and vital role in managing the company’s transactions, determining the company’s management policies, and controlling operations to ensure company’s efficiency. To develop strategies, manage risks, and drive confidence to achieve organizational goals in order to create effectiveness and efficiency, companies san consider establising enterprise risk management. In this study, it is proven that the existence of enterprise risk management can improve the company’s financial performance.

Financial sustainability and earnings manipulation: Evidence from Spanish provincial councils

While earnings manipulation has a broad literature in the private sector, there is a lack of research on this topic in the public sector. This paper aims to explore the level of earnings management in Spanish provincial councils. The use of accrual accounting may be viewed negatively by stakeholders such as the central government, opposition parties, and citizens. The public choice theory highlights the conflicting interests of politicians seeking re-election and citizens aiming to maximize their welfare, leading to potential manipulation of earnings. Discretionary accruals are used as a proxy for earnings management in this study. Additionally, the impact of financial sustainability measures on earnings management is examined. The analysis covers the period from 2017 to 2020 and reveals how certain financial sustainability ratios and pre-election years can influence the extent of earnings manipulation. This paper contributes to the existing literature on earnings management in local governments by examining the connection between financial sustainability indicators and this behavior. Specifically, it focuses on the relationship between budget vulnerability and sustainability, and their influence on the magnitude of discretionary accruals.

The governance involvement in the relationship between earnings management and surplus free cash flow

The purpose of this study is to examine empirically the association between surplus free cash flow (SFCF) and earnings management (EM), and the moderating effect of governance on this relationship. The study used a sample of non-financial companies listed on the Amman Stock Exchange (ASE) over the ten-year period (2011–2020) with all the information necessary to estimate the study variables. The modified Jones (1991) model is used to estimate discretionary accruals, a widely used proxy for earnings management. Based on the regression analysis of the related panel data collected, the study’s findings indicate that SFCF is positively associated with EM activities. This result is consistent with most prior related study’s findings (Nouri & Gilaninia, 2017; Rahmawati, 2020) and suggests that when growth opportunities are limited, the free cash flow induces management to involve in upward management practices. Additionally, results indicate a significant negative impact of the interaction variable SFCF*AQ (audit quality) on EM, suggesting that, in an SFCF situation, AQ reduces manager’s tendency to involve in upward EM practices. The study’s results are likely to be useful for accounting researchers, local governmental bodies, and policymakers who are concern with the impact of EM practices on the quality of earnings.

Liquidity Risk Management and Financial Performance of Listed Commercial Banks in Nigeria

The study investigates the relationship between liquidity risk management and financial performance of listed commercial banks in Nigeria. To achieve this, liquidity risk management proxies which have been widely used in the literature were employed namely deposit to total asset, total loan to deposit, liquidity asset to total asset and short-term liability to total asset ratios (independent variables) and a measure of financial performance return on asset (dependent variable). Ex-post facto research design was employed and panel data sourced from the yearly published annual reports and accounts of listed commercial banks in Nigeria. The fixed and random effects panel regression results reveal mixed evidence suggesting that the effect of liquidity risk management on financial performance of the listed commercial banks in Nigeria depends largely on measures of liquidity risk management used in this study. One key policy implication of this outcome is that maintaining a balanced lending and funding strategy is crucial for commercial banks. Hence, it recommends among others that managers of listed commercial banks in Nigeria should find an optimal balance that aligns with bank’s risk appetite and growth objectives and should also exercise caution in expanding lending.

Earnings management and ESG performance: Empirical evidence from Italian context

The purpose of this paper is to investigate the relationship between environmental, social and governance (ESG) performance, both in its totality and its three pillars (environmental, social and governance), and earnings management. The sample includes companies listed on the Italian Stock Exchange market (FTSE Italia All-Share index) during business years 2014–2019. After excluding those firms belonging to the financial sector, along with those with missing values, the final sample consists of 103 firms for a total of 618 firm-year observations. Data have been collected from two databases, that are Refinitiv Eikon (for ESG and governance variables) and AIDA Bureau van Dijk (for economic and financial variables). Panel data regression analysis has been implemented to analyse the impact of ESG performance on accrual-based (AEM) and real based (REM) earnings management. It is found that ESG performance has a negative effect on AEM but not on REM, and the governance pillar has the strongest impact compared to those of environmental and social ones. In addition, this research suggests a bidirectional link between ESG performance and earnings management. This analysis contributes to prior research since it is the first study that has used accrual and real-based earnings management proxies with this topic in relation with ESG performance and its three components in the Italian traditional corporate governance system. Corporate practice, regulators and researchers should recognize that ESG performance and earnings management should be discussed together.

Earnings management and corporate governance during COVID-19: Evidence from the European capital market

The objective of this paper is to analyse the impact of COVID-19 on the earnings manipulation of firms and whether corporate governance has a mitigating effect. The methodological approach consists of two steps: in the first stage, a pooled ordinary least squares (OLS) regression model has been implemented to compute the earnings management proxies, whereas in the second stage panel data regression analysis has been adopted to test the effects of corporate governance variables on the earnings management proxies themselves. Using data from STOXX Europe 600 as a proxy for the European capital market, it is found that the level of companies’ earnings manipulation increased during the pandemic. In particular, companies have engaged in more accounting and real earnings management (REM) practices. The findings show that a larger board helps to mitigate the positive relationship between COVID-19 and earnings manipulation, whereas no mitigating effect for board independence, board diversity and chief executive officer (CEO) duality has been found. In addition, an industry analysis has been developed both for robustness purposes and in order to check which sectors have been most and least affected by the pandemic. In particular, the findings show how the most affected industries reported a higher level of earnings management, resulting in a worse reporting quality. This paper provides additional evidence on the impact of COVID-19 on earnings management using a strong multi-country level governance setting. The results of this study provide useful suggestions for business practice, investors and policymakers.

PENGARUH GOOD CORPORATE GOVERNANCE TERHADAP MANAJEMEN LABA PADA PERUSAHAAN MANUFAKTUR YANG TERDAFTAR DI BEI SEBELUM DAN SEMASA PANDEMI COVID

This study aims to obtain empirical evidence from Managerial Ownership, Institutional Ownership, Independent Board of Commissioners, and the Audit Committee which is an indicator of Good Corporate Governance as an independent variable, and other variables namely Leverage and Firm Size as control variables, and Pandemic Covid as a dummy variable, on the dependent variable namely Earnings Management in Manufacturing Companies sub-sector Food and Beverage listed on the Indonesia Stock Exchange (IDX). Discretionary accruals with the Kothari model used as a proxy for earnings management. The sample was obtained by purposive sampling method with predetermined criteria, and resulted 40 in manufacturing companies sub-sector food and beverage in the 2016-2020 period with a total of 200 data. Descriptive statistics and multiple regression were used as data analysis methods. The results of this study can be summarized as follows. The first regression analysis, namely before the covid pandemic period, showed that Institutional Ownership and Audit Committee had a significant negative effect on Earnings Management, while Managerial Ownership, Independent Board of Commissioners, Leverage, and Firm Size had no effect on Earnings Management. The second regression analysis, before and during the covid pandemic, showed that Managerial Ownership, Institutional Ownership, and Leverage had a significant negative effect on Earnings Management. Meanwhile, the Independent Board of Commissioners, Audit Committee, Firm Size, and the Covid Pandemic have no effect on Earnings Management. Based on this explanation, it can be concluded that the implementation of Good Corporate Governance in Manufacturing companies in the Food and Beverage Subsector can be said to be still relatively ineffective, because only Managerial Ownership, Institutional Ownership and Audit Committees in this study are able to carry out their duties effectively to minimize the practice of earnings management happened to the company.

Cash Flow Management and Firm Performance: Moderating Effect of Corporate Governance Mechanism in the Era of Disruption in Emerging Economy

The moderating effect of corporate governance mechanism on the relationship between cash flow management and performance of listed manufacturing firms in the era of disruption in Nigeria was empirically investigated in this study. Operating, financing, and investing activities were used as proxies for cash flow management. Net assets per share (NAPS) was used to measure firm performance while board independence was used as a proxy for the corporate governance mechanism (moderating variable). Panel least squares regression model operated with E-View 12 was utilized to perform the statistical test of parameter estimates, and six hypotheses were formulated to direct the investigation. Ex Post Facto design was used, and the data for the study was collected from the published annual financial reports and accounts of companies listed on the Nigerian Exchange Group (NGX) under the consumer goods sector, industrial goods sector, and oil and gas sector. The results of the study show that operating activities (OA) significantly affect firm performance (NAPS) at 5% significant level. Furthermore, it was discovered that, at 1% significant level, financing activities (FA) has a positive and significant effect on firm performance, whereas investing activities (FA) has the same effect on firm performance in Nigeria. Also, it was noted that, at 1-5% significant level, corporate governance mechanism (board independence) moderated the effect of cash flow management on firm performance in Nigeria. Thus, the study concludes that in this disruptive era in Nigeria, firms’ performance is determined by their ability to manage their cash flow effectively. Moreover, strong corporate governance practices ensure the success of the company. In light of the study's findings, the study recommends that businesses should review their approaches to managing cash flow so that they can produce enough cash to cover both their operating and investing needs. On the other hand, net cash flow from financing activities ought to be preserved because it has a substantial impact on the financial results of the Nigerian listed companies.

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

Do the educational profile, gender, and professional experience of audit committee financial experts improve financial reporting quality?

Going beyond the mere presence of the audit committee financial experts (ACFEs) within the audit committee, we examine whether the educational profile, gender, and professional experience of ACFEs reduces the extent of earnings management. Using a sample of Chinese listed companies, we find evidence suggesting that ACFEs with postgraduate qualifications and other professional certifications mitigate earnings management. Female ACFEs with postgraduate qualifications are more effective in mitigating earnings management than their male counterparts. Also, the professional experience of ACFEs helps them reduce the extent of earnings management. Results are more pronounced in the case of female ACFEs with more professional experience. In addition, we found that ACFEs working in privately-owned Chinese firms better mitigate earnings management compared to those in state-owned Chinese firms. Overall, our results remain robust after controlling for potential endogeneity problems and using alternative earnings management proxies. Our study provides implications for regulators about necessary policy reforms regarding audit committee composition and recommends that companies appoint female ACFEs in China.

DOES GAME THEORY AMELIORATE CONFLICT MANAGEMENT AND ORGANIZATIONAL PRODUCTIVITY?

The study examines the impact of game theory as a conflict management style on organizational productivity. It adopts a purposive sampling technique. A total of one hundred and sixty copies of questionnaires retrieved from the respondents were used for the analysis. The study applied a multiple regression model technique to establish the effects of conflict management proxies on organizational productivity. Results revealed that with the inclusion of game theory as a conflict management variable, its contributions rose from 39.33% to 48.80%. In addition, the proxies of compromising and accommodating are statistically significant with the presence of game theory. Accordingly, the study concludes that game theory drives organizational productivity. It is therefore recommended that management should apply game theory to manage organizational conflicts.
 Keywords: Accommodating, Collaborating, Compromise, Conflict, Game Theory.

DOES GAME THEORY AMELIORATE CONFLICT MANAGEMENT AND ORGANIZATIONAL PRODUCTIVITY?

The study examines the impact of game theory as a conflict management style on organizational productivity. It adopts a purposive sampling technique. A total of one hundred and sixty copies of questionnaires retrieved from the respondents were used for the analysis. The study applied a multiple regression model technique to establish the effects of conflict management proxies on organizational productivity. Results revealed that with the inclusion of game theory as a conflict management variable, its contributions rose from 39.33% to 48.80%. In addition, the proxies of compromising and accommodating are statistically significant with the presence of game theory. Accordingly, the study concludes that game theory drives organizational productivity. It is therefore recommended that management should apply game theory to manage organizational conflicts.
 Keywords: Accommodating, Collaborating, Compromise, Conflict, Game Theory.

Influence of Firm size on Audit Quality and Earnings Management Relationship: Evidence from Listed Manufacturing Firms in Nigeria

The study investigated the influence of Firm size on the relationship between Audit quality and Earnings Management of listed Consumer Goods Manufacturing firms in Nigeria. This study tested a number of audit quality indicators (auditor’s tenure, Audit firm size and joint audit) and earnings management proxies that is (earnings restatement and discretionary accruals), using 26 listed consumer-goods manufacturing firms as the study population. Secondary data were extracted from the annual report of 13 listed consumer-goods manufacturing firms while judgmental sample from the population, covering the study period from 2012 to 2018 using historical data were adopted. The data were tested through the use of Univariate, Bivariate and Multivariate analysis. Univariate/descriptive, Bivariate, Pearson Product Moment Correlation (PPMC) techniques by use of E-view 10 Econometric software and Multivariate – regression model. The findings of the study showed that firm size variability does not influence every aspect of the Firm's attributes. Some aspects of Firms' characteristics are influenced by the size of the Firm whereas some other aspects do not respond to size variability. As was indicated by the Firm size analyses, earnings restatement of consumer-goods manufacturing firms does not respond to Firm size attribute while their discretionary accrual practices significantly depend on their size attributes. The study concludes that firm size is a significant moderator between the use of audit quality and earnings management, however it depends of the variable of earnings management used. In the light of these, it is the recommendation of this study that to ensure positive significant relationship with earnings management, the firms should voluntary engage two audit firms in all to other to allow for effective comparison, so that hidden information in financial statement could be dictated or revealed; the total assets as a dimension of firm size should be r