The Impact of Financial Performance on Earnings Management Practice Behavior (An Empirical Study on Financial Companies in Jordan) (original) (raw)

The Impact of Earnings Management Practices on the Market Value of Industrial Companies Listed on the Amman Stock Exchange: Evidence from Jordan

WSEAS TRANSACTIONS ON BUSINESS AND ECONOMICS

Reported earnings and their prediction is one of the most important factors that are relied upon in determining the value of various investments, given that the higher the earnings, the greater the possibility of distributing profits, and accordingly, stock prices are determined in the financial markets. This study aims to examine the impact of earnings management on the firm value of Jordanian industrial companies listed on the Amman Stock Exchange for 2015-2019. This study used discretionary accruals according to the modified Jones model to measure earnings management. Tobin’s Q as well is used as a proxy to firm value. Furthermore, this study used firm size, firm age, and leverage as control variables. In analyzing data, STATA is used. The results showed that earnings management has a negative but insignificant impact on firm value. On the other hand, leverage has a significant and negative effect on firm value. Firm age has a positive but insignificant effect on firm value. Firm...

Accrual-based Earnings Management, Real Earnings Management and Firm Performance: Evidence from Public Shareholders Listed Firms on Jordanian's Stock Market

mohammad mustafa dakhlallh, 2020

Managers manipulate the firm's earnings through earnings management to demonstrate higher performance in the current and future periods. The current study's aimed to examine the influence of accrual-based earnings management (AEM) and actual earnings management (REM) on Jordanian firms' performance. This study examined accrual-based earnings management through discretionary accrual, real earnings management through abnormal operating cash flow and firm performance through Tobin's Q. This study uses the panel data technique to assess the connection between variables. The sample includes 180 companies listed on the Amman Stock Exchange (ASE) from 2009 to 2017. Through the utilize the fixed-effect method in order to investigate the association between selected components with the Jordanian firms' performance, the results of this study indicated that the association between discretionary accrual and abnormal cash flow from operations with Tobin's Q is significantly negatively. The present study shows that firms involved in discretionary accrual and cash flow from operations to report greater earnings in the future have less performance. Hence, it shows that the manipulation of earnings causes issues in the future. Whereas, this study offers empirical evidence to assist stakeholders, managers, and stakeholders in their decision.

The Impact of Financial Crisis on Earnings Management Activities: Evidence from Jordan

Jordan Journal of Business Administration

This study examined empirically the earnings management practices of Jordanian firms during the financial crisis. The study used a sample of 568 observations (firm-year) related to 71 non-financial firms listed in Amman Stock Exchange (ASE) over the 8-year period (2005-2012). Correlation and OLS regression analyses are used to test the study's predictions. The study reports a negative, but statistically insignificant, association between earnings management activities and the financial crisis. This result does not provide sufficient support for the study’s predictions and most prior studies’ findings which report a decrease in earning-management practices during the financial crisis. Consistent with most prior related studies, the study findings indicate that firm’s size and CFO are inversely related to earnings management activities, while leverage is positively related to earnings management. Failure to detect a significant relationship between the financial crisis and earning...

Exploitation of Earnings Management Concept to Influence the Quality of Accounting Information: Evidence from Jordan

2017

This study aims to understand the nature impact of earnings management practice on the quality of accounting information in Jordan.The study used the quantitative technique to gather the data by using a questionnaire to understand the users' attitudes about earnings management practice in Jordan and how this practice influences the quality of accounting information. To discover this issue, the researcher documented several criteria to identify the concept of "earning management'' and define the variables to measure it. The study states that all accounting information users believe that the earnings management practice is used by some companies in Jordan. They stated how the practice affects the quality of accounting information by detecting a significant effect of earnings management, which in turn has an impact on users' decisions, such as investors, financial analysts, and creditors. In addition, the study's outcome specified that earnings management has an important influence on accounting information quality. Most companies resort to using earnings management techniques to meet shareholders' wants, financial analysts' expectations for the company's performance, or management's desire to increase the net income which in turn increases the rewards they receive or to achieve their personal interests that resulted from agency problems. Finally, earnings management is considered a form of accounting manipulation practiced without breaching laws and standards.The consequences of the current study help users of financial reports, such as managers and investors, detect an effect of earning management on users' decision making.It is believed that there is no Jordanian study to date examining the impact of earnings management on the quality of accounting information. Therefore, this study significantly contributes to the limited literature on the exploitation of the earnings management concept to influence the quality of accounting information in developing countries.The difficulty with using a questionnaire in developing countries, such as Jordan, also there are a number of users who do not care about the results of the study Keywords: Earnings management, real activity manipulation, accrual manipulation, consequences of earnings management, quality of accounting information, reasons for earnings management applications.

Earnings management and its applications in Saudi Arabia context: Conceptual framework and literature review

Accounting, 2021

Continuous improvement of accounting policies coincides with the increase and development of earnings management. Several studies focus on this topic, and it became subject to many investigations. This paper deals with current literature focused on several axes of earnings management like motives for practicing earnings management, earnings management types, developed models to discover earnings management, factors affecting earnings management, and the consequences of earnings management practices. Besides, this research focuses on earnings management in Saudi Arabia in particular. In the recent period, Saudi Arabia is going through changes in the Saudi economy and changes in accounting systems, such as adopting the IFRS standards, which provides opportunities for expanding research into earnings management in the Saudi Arabia context. Several studies conclude that Saudi companies' earnings management practices are done in several ways and affected by many factors.

The Impact of Earnings Management on Stock Returns for Listed Industrial Firms on the Amman Stock Exchange

Business and Economic Research, 2019

This study aims to investigate the impacts of earning management on the stock returns of listed industrial firms on the Amman Stock Exchange, with the observance of (firm size and operating cash flow) as control variables for the study. In order to fulfill the purposes of this study, the researcher utilized (Jones model) and (Modified Jones model) to measure earning management through reliance on discretionary accruals as evidence of earnings management practices, and utilize (Market Return On the Stock model) to measure stock returns, and the study population was Mining and Extraction Industries firms also Food and Beverages firms listed in Amman Stock Exchange, the study was conducted on a sample of 18 firms which represents 75% of the study population for the period from 2014 to 2018, In addition to using descriptive and analytical approach to data collection, analysis, and testing hypotheses through financial statements of the firms in the study, the researcher has used the Statistical

Earnings Management, Conceptual Framework and Literature Review: Saudi Arabia as a Case Study

Haya: The Saudi Journal of Life Sciences

This article provides the conceptual framework for earnings management, which begins by presenting the concept of earnings management, then the actions, motives, techniques, measurement, and then the consequences of this practice. This article also presented studies that dealt with earnings management in the Saudi context. This is because the Kingdom of Saudi Arabia has recently witnessed a clear development in companies and changes in accounting systems which in turn provides an opportunity for more research on earnings management in Saudi Arabia. Several studies provide evidence that EM occurs in Saudi companies, and there are many motivations to practice earnings management in Saudi companies.

Earnings management and its relationship with corporate governance mechanisms in Jordanian industrial firms

2015

This thesis investigates the association between corporate governance mechanisms and earnings management in industrial Jordanian firms. We identify the most important corporate governance mechanisms that have an effect on accounting choices and operating decisions, investigate the tools that managers use to decrease or increase earnings in Jordanian industrial firms, and finally, determine which accruals model is more powerful to detect earnings management in Jordanian industrial companies. Historically, corporate governance mechanisms are considered to be the most important factors in assessing and monitoring the effectiveness of financial reporting (Brown, Pottb and Wompenerb, 2014), and may be considered to be a cornerstone of control in general. Internal and external corporate governance is established by senior managers to improve the efficiency and effectiveness of operations and reduce the incidence of error or manipulation in accounting systems (Lee, 2006). Earnings manageme...

A Study of the Factors Affecting Earnings Management: Iranian Overview

The present study examines the factors affecting earnings management of listed companies in Tehran Stock Exchange. So, the effects of the debt-equity ratio, firm size, managers' bonus and effective tax rate on earnings management are examined. Totally, 114 listed companies in Tehran Stock Exchange during 2006-2010 are studied. Statistical method used was cross-sectional ordinary least square regression, correlation analysis. The results indicate that there is a significant as well inverse relationship between debt-equality ratio and earnings management. Also, there is a significant and positive relationship between firm size and earnings management. However, there did not found any significant relationship between changes in managers' bonus and effective tax rate with earnings management.

Factors that Motivate The Act of Earnings Management

Media Bisnis, 2021

The purpose of this research is to obtain empirical evidence about the influence of return on asset, financial leverage, firm size, firm age, fixed asset turnover, free cash flow, sales growth, audit quality, managerial ownership, institutional ownership, board size, and audit committee on earnings management. The population used in this research are non financial companies listed in Indonesia Stock Exchange from 2017 to 2019. The sample used for this research consists of 195 listed non-financial companies. The sampling technique used purposive sampling method, tested and analyzed using multiple regression method. The result of this research shows that return on asset, financial leverage, sales growth, and audit committee has positive influence while fixed asset turnover and free cash flow has negative influence on earnings management, moreover the other independent variables such as firm size, firm age, audit quality, managerial ownership, institutional ownership, and board size have no influence on earnings management.