The Effects of Real Earnings Manipulation on the Future Operating Performance PDF Download
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Author: Bazeet Badru
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This study analyses the aspects of real earnings management proxy that involves sales manipulation employ by companies to improve current performance against the future performance. The main objective was centered on whether manipulation of earnings to show good performance in the current period has implication on future performance. In order to achieve the objective, secondary data for a total number of 117 company year observations over a period from 2009 to 2011 was used. The empirical analysis in this study provides evidence that the larger percentage of Nigerian companies engage in sales manipulation to mimic strong performance in the current period, which later has adverse consequences on their future performance. The implication is that real earnings management through sales manipulation has a negative effect on the future performance. Based on the results, it can be concluded that real earnings management has a negative influence on the future performance of companies. The study infers that this explains why most of the Nigeria companies could not survive in the long term because the manager's deceive investors by managing earnings to falsify performance.
Author: Bazeet Badru
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This study analyses the aspects of real earnings management proxy that involves sales manipulation employ by companies to improve current performance against the future performance. The main objective was centered on whether manipulation of earnings to show good performance in the current period has implication on future performance. In order to achieve the objective, secondary data for a total number of 117 company year observations over a period from 2009 to 2011 was used. The empirical analysis in this study provides evidence that the larger percentage of Nigerian companies engage in sales manipulation to mimic strong performance in the current period, which later has adverse consequences on their future performance. The implication is that real earnings management through sales manipulation has a negative effect on the future performance. Based on the results, it can be concluded that real earnings management has a negative influence on the future performance of companies. The study infers that this explains why most of the Nigeria companies could not survive in the long term because the manager's deceive investors by managing earnings to falsify performance.
Author: Patrick Vorst
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
I examine whether a reversal of an abnormal cut in discretionary investments is associated with the degree to which the cut is reflective of real earnings management (REM) and whether and how it predicts future operating performance. I define a reversal as occurring when a firm cuts discretionary investments to a below-expected level in one period and reverts back to at least the expected level of investment during the next period. Unlike accrual earnings management, REM involves deliberately altering the operations of the firm to influence reported accounting numbers. To the extent that such interventions diverge from optimality, they can expose the firm to real economic costs. I find that a reversal of an abnormal cut in discretionary investments in the year after the cut has taken place is indicative of REM. I further find that, on average, reversing cuts are associated with lower future operating performance, but that such results vary significantly depending on the various incentives to engage in REM, as well as other factors that affect its associated costs and benefits. These findings are of interest to investors, regulators and academics with respect to the identification and consequences of REM.
Author: Katherine Ann Gunny
Publisher:
ISBN:
Category :
Languages : en
Pages : 204
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Book Description
Author: Amy Yunzhi Zang
Publisher: ProQuest
ISBN: 9780549163251
Category :
Languages : en
Pages : 120
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Book Description
Author: Theodore E. Christensen
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
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Book Description
Researchers typically infer real earnings management when a firm's operating and investing activities differ from industry norms. One significant problem with classifying deviations from industry averages as “earnings management” is that companies can change their operating and investing decisions for strategic reasons, and it is difficult to distinguish strategy adjustments from earnings management. We focus on opportunistic real earnings management, which we label “manipulation.” We use Principal Components Analysis (PCA) to develop real earnings manipulation (REM) measures that reflect the concurrent use of multiple activities. This approach is promising because, although there are many possible sources of abnormal activity levels aside from manipulation, there are fewer sources that can explain the combined, income-increasing use of these real activities. This simple approach results in REM metrics that (1) associate negatively with future operating performance, (2) reduce earnings persistence, (3) yield high-power tests, and (4) appear to capture “manipulation” reasonably well across most firm life-cycle stages. Importantly, this approach performs better than the standard real earnings management metrics across all dimensions. Also, because this innovation does not require a long time-series of data or rely on future period realizations for classification, it can be useful in more research settings than other recent innovations proposed in prior research.
Author: Katherine Gunny
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Book Description
This paper examines the consequences of real activities manipulation. Using financial statement data, I identify firms that appear to engage in any of the following real activities manipulation (RM): reducing Ramp;D to increase income, reducing SGamp;A to increase income, timing of income recognition from the disposal of long-lived assets and investments, and cutting prices to boost sales in the current period and/or overproducing to decrease COGS expense. I then examine whether RM is associated with firms just meeting two earnings benchmarks (zero and last year's earnings). The results indicate that real activities manipulation of Ramp;D, SGamp;A, and production are positively associated with firms just meeting these earnings benchmarks. Next, I examine the extent to which real activities manipulation affects subsequent performance. A negative association between just meeting earnings benchmarks by using RM and subsequent performance supports prior research suggesting managers opportunistically use earnings management to the detriment of shareholders (i.e., managerial opportunism). A positive association is consistent with managers using operational discretion to attain benefits that allow better future performance or to signal future firm value. I find that firm-years reflecting RM to just meet earnings benchmarks have higher subsequent firm performance (compared to firm-years that do not engage in RM and miss or just meet the earnings benchmarks). In this setting, using RM to influence the output of the accounting system is not opportunistic, but consistent with managers attaining benefits that allow better future performance or signaling.
Author: Gary K. Taylor
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Using three criteria, we identify firms that may have engaged in real earnings management. We then investigate whether real earnings management activities lead to a significant decline in these firms' subsequent operating performances. Our test results demonstrate that firms identified as conducting real earnings management activities do not experience a significant decline in subsequent operating performance. The finding enhances our understanding of the process through which management evaluates the costs and benefits of real earnings management and helps address concerns about costs of the increase in real earnings management activities that arose due to the heightened accounting regulation implemented by the Sarbanes-Oxley Act.
Author: Kenneth A. Merchant
Publisher: Pearson Education
ISBN: 9780273708018
Category : Business & Economics
Languages : en
Pages : 876
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Book Description
With its unique range of case studies, real life examples and comprehensive coverage of the latest management control-related tools and techniques, Management Control Systems is the ideal guide to this complex and multidimensional subject for upper level undergraduates, postgraduates and practising professionals.
Author: Joshua Ronen
Publisher: Springer Science & Business Media
ISBN: 0387257713
Category : Business & Economics
Languages : en
Pages : 587
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Book Description
This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?
Author: Shahzad Uddin
Publisher: Emerald Group Publishing
ISBN: 0857244515
Category : Business & Economics
Languages : en
Pages : 310
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Book Description
Includes research papers that examines various issues including the adoption of International Financial Reporting Standards (IFRS) and International Public Sector Accounting Standards (IPSASs), management accounting change in the context of public sector reforms, corporate reporting disclosures, auditing, etcetera.
