Do Earnings Management Leads to Sub-optimal Investments by Firms? Empirical Evidence From the Textile Sector of Pakistan (original) (raw)
Related papers
The Effect Of Audit Quality And Earnings Management On Firm Performance
Proceedings of the 1st International Conference on Applied Economics and Social Science (ICAESS 2019), 2019
This study aims to examine the effects of audit quality on earnings management, audit quality and earnings management impact on the performance of nonfinancial companies listed in Indonesia Stock Exchange (IDX) period 2010-2015. Audit quality is proxy by auditor size, audit tenure and audit fees. The earnings management of discretionary accruals used modified Jones models by Dechow (1995), firm performance is proxy by Tobins'Q. The analysis technique used is the data panel regression analysis with EVIEWS software. The results of the study found are: firstly, that audit quality has no effect on firm performance, quality audit but has no effect on earnings management and earnings management has no effect on firm performance.
Corporate Governance and Earnings Management an Empirical Evidence Form Pakistani Listed Companies
The study examines the relationship between quality of Corporate Governance and Earnings Management. A set of listed Companies have been investigated to analyze the relationship for the year 2006. Quality has been measured by assigning weights to a set of related variables whereas earnings management has been quantified by discretionary accruals. Modified Cross Sectional Jones Model has been used to determine the Discretionary Accruals. Ordinary least square estimation indicates the presence of Positive relationship between corporate governance and earnings management. Results appear un conventional, It may be due to the transition phase through which the Pakistani Companies are passing after promulgation of code of corporate governance in 2002 which has created a tendency to increase discretionary accruals as a risk averse measure.
Journal of Insurance & Finance, 2022
Financial statements are the most important source of information which can be used to find out the company's earnings that is critical for investment decisions. Earnings management is a manipulation tool used by the managers when preparing the financial statements, and this has a significant impact on the decision made by the investors. The collapse of companies, which recorded extraordinary earnings growth in their audited financial statements created doubts over the quality of audit performed and the effectiveness of the corporate governance practices. This study examines the impact of corporate governance and audit quality on earnings management using quantitative research approach that analyses secondary data extracted from the audited financial statements of a sample of 41 listed non-financial companies for the period from 2016 to 2020. Correlation analysis and pooled ordinary least square regression are used to analyze the data and that analysis reveals that corporate governance mechanisms significantly impact the degree of earnings management in Sri Lanka, while audit quality does not show a significant relationship with earnings management. Audit committee size, CEO duality and board independence are negatively and significantly associated with discretionary accruals, while board size shows an insignificant but positive relationship. Both of the proxies of audit quality (audit firm size and audit fees) show an insignificant relationship with discretionary accruals. Leverage and return on assets are positively related to earnings management, while the cash flow from operations shows a negative relationship. The findings provide useful insights to regulators, policy makers and professional accounting bodies to better regulate the quality of audit services performed.
Global Journal of Economics and Business, 2021
This study aims to investigate empirically how the characteristics of the firm; the audit quality and the corporate governance impact the management of earnings. The population employed in this study is industrial firms listed on the Amman Stock Exchange between 2017 and 2019. The method of sampling employed in this study is purposive sampling. 39 firms are analyzed, with 117 items of data being achieved. Also, this study applies statistical testing via multiple regression. The findings show that sales growth, free cash flow, financial leverage, and return on assets all have an impact on earnings management. Meanwhile, other factors such as audit quality, firm size, audit committee, the board size, institutional ownership, and managerial ownership, have not to impact on earnings management.
2013
This research is going to study the effect of auditing quality on earnings management in firms accepted in Tehran Stock Exchange. Three criteria of: audit firm size, industry specialization and auditor's tenure were used to measure auditing quality. Also Jones's adjusted model has been used to calculate earnings management. 73 companies during the time period between 2008 and 2010 were investigated. To test the hypotheses we used linear regression model and difference test and the effects of variables were investigated separately because the overall model test created some co-linearity problems. The findings of the present research show that the results of the annual data and the interim data have been the same and this shows that auditing firm size does not affect earnings management meaningfully but industry specialization and auditor's tenure have had a negative effect on earnings management. Also earnings management in firms audited by big auditors, industry speciali...
Objective-The purpose of this research is to empirically examine how company characteristics, corporate governance and audit quality affect earnings management. Methodology/Technique-The population used for this research is manufacturing companies listed on the Indonesian Stock Exchange between 2013 and 2015. The sampling method used in this research is purposive sampling. 64 companies are examined, with 192 items of data being obtained. Findings-This research also uses statistical testing through a multiple regression. The results show that return on assets, financial leverage, free cash flow, and sales growth all have an influence on earnings management. Meanwhile, other variables such as managerial ownership, institutional ownership, board size, the presence of an audit committee, firm size, and audit quality have no significant effect on earnings management. Novelty-In this research, company characteristics are proxied with the return on assets, financial leverage, firm size, free cash flow, and sales growth, while corporate governance is proxied with managerial ownership, institutional ownership, board size, and the presence of an audit committee.
The Effectiveness of Corporate Governance in Constraining Earnings Management in Pakistan
Although firms' annual reports are supposed to provide an unbiased and accurate picture of their financial position, managers may be induced to engage in earnings management in order to circumvent expectations. Such incentives can take the shape of stock prices, management incentives, or debt covenants. The purpose of this study is to investigate the effectiveness of three attributes of corporate governance in constraining earnings management practices. These include board characteristics, audit committee characteristics, and ownership structure. Based on a sample of 120 nonfinancial firms listed on the Karachi Stock Exchange during 2003-12, we find that audit committee independence is negatively associated with earnings management, while CEO duality and institutional shareholding is positively associated with earnings management. Moreover, the effectiveness of governance mechanisms in constraining earnings management practices differs across high-and low-growth firms.
International Journal of Academic Research in Business and Social Sciences, 2017
The current study aimed to identify the impact of Earnings Management on Financiers' decisions, either those financiers are creditors or investors, and the role of the mediator variable, the Audit Quality, on the relationship between the independent and dependent variables. The study population consisted from manufacturing companies in Amman Stock Exchange for the period 2005-2009. In order to address the study aims, the researcher used descriptive statistical methods for all variables of the study and tested the hypotheses of the study using the multiple regression models. The study results revealed that there is no impact of earning management on financier decisions and there no impact for the mediator variable on the relationship between the independent and dependent variables. In regards to the control variables, we found that there is an impact of earning per share percentage on investor decision; in contrast there is no impact of growth and the firm size. In addition, there is an impact of growth percentage in creditor's decision, while there is no impact on firm size or growth percentage.
Audit Decision: Interaction between Earnings Management and Audit Specialization
2021
This research is purposed to get emperical evidence about the interaction influence of earnings management and audit specialization on audit decision. The population of this research are all manufacturing companies consistently listed and active in Indonesia Stock Exchange from the year of 2016 to 2018. This research uses 86 samples of manufacturing companies selected through purposive sampling method resulting in 258 data to be analyzed using binary logistic regression. The result of this study indicates that the interaction between earnings management and audit specialization influence positive and significant on audit decision. Investors can make the auditor decision and auditor specialization as a consideration in investing. Auditor specialization can detect earnings management and auditors tend to give qualified opinion. The company's goal to do earnings management is to obtain an unqualified opinion. Audit specialization can reveal the existence of earnings management and ...
The Impact of Quality Audit on the Management of Earnings
Corporate Ownership and Control, 2015
In a Tunisian context, the purpose of this research is to study the aspects related to the quality of external audit, relating to the opportunistic management of earnings. Indeed, we are interested in the aspect of handling the earnings as a means for the manager to achieve its objectives by publishing a result different from that which is achieved. Thus, the quality of external audit, as an essential element of the system of government of the companies, may be able to limit the process of accounting manipulation, and therefore to protect the interests of investors and creditors. Given these factors, there is a key question: To what extent can the quality of the external audit influence the opportunistic management of earnings in Tunisian businesses? In this research, our goal is to empirically test a sample of Tunisian companies listed on the stock market, the impact of audit quality on the opportunistic practice of earnings