Download or read book Earnings Management Conservatism and Earnings Quality written by Ralf Ewert and published by . This book was released on 2012 with total page 142 pages. Available in PDF, EPUB and Kindle. Book excerpt: Earnings Management, Conservatism, and Earnings Quality reviews and illustrates earnings management, conservatism, and their effects on earnings quality in an economic modeling framework. Both earnings management and conservative accounting introduce biases to financial reports. The fundamental issue addressed is what economic effects these biases have on earnings quality or financial reporting quality. Earnings Management, Conservatism, and Earnings Quality reviews analytical models of earnings management and conservatism and shows that both can have beneficial or detrimental economic effects, so a differentiated view is appropriate. Earnings management can provide additional information via the financial reporting communication channel, but it can also be used to misrepresent the firm's position. What the authors find is that similar to earnings management, conservatism can reduce the information content of financial reports if it suppresses relevant information, but it can be a desirable feature that improves economic efficiency. The approach to study earnings management, conservatism, and earnings quality is based on the information economics literature. A variety of analytical models are reviewed that capture the effects and subtle interactions of managers' incentives and rational expectations of users. The benefit of analytical models is to make precise these, often highly complex, strategic effects. They offer a rigorous explanation for the phenomena and show that sometimes conventional wisdom does not apply. The monograph is organized around a few basic model settings, which are presented in simple versions first and then in extensions to elicit the main insights most clearly. Chapter 2 presents the basic rational expectations equilibrium model with earnings management and rational inferences by the capital market. Chapter 3 is devoted to earnings quality and earnings quality metrics used in many studies. Chapter 4 studies conservatism in accounting. Finally, the authors examine the interaction between conservatism and earnings management. Each chapter ends with a section containing a summary of the main findings and conclusions.

Download or read book Accounting Conservatism Or Earnings Management written by Timothy Bryan and published by Dissertation Discovery Company. This book was released on 2019-08-07 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: This paper empirically examines the relationship between conservatism and earnings management in chemical and allied products manufacturers via an analysis of the allowance for doubtful accounts and bad debt expense. Results indicate that the allowance for doubtful accounts is overstated and has become more overstated since 2004. In addition, results show that firms utilized the excessive conservatism to manage earnings to achieve earnings goals throughout the study period. An important overall inference from these results is that the traditional view of the allowance for doubtful accounts as unconditional conservatism is, in fact, conditional conservatism. Dissertation Discovery Company and Jacksonville University are dedicated to making scholarly works more discoverable and accessible throughout the world. This dissertation, "Accounting Conservatism or Earnings Management" by Timothy Gordon Bryan, was obtained from Jacksonville University and is being sold with permission from the author. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation.

Download or read book Earnings Management Conservatism and Earnings Quality written by Ralf Ewert and published by . This book was released on 2012 with total page 142 pages. Available in PDF, EPUB and Kindle. Book excerpt: Earnings Management, Conservatism, and Earnings Quality reviews and illustrates earnings management, conservatism, and their effects on earnings quality in an economic modeling framework. Both earnings management and conservative accounting introduce biases to financial reports. The fundamental issue addressed is what economic effects these biases have on earnings quality or financial reporting quality. Earnings Management, Conservatism, and Earnings Quality reviews analytical models of earnings management and conservatism and shows that both can have beneficial or detrimental economic effects, so a differentiated view is appropriate. Earnings management can provide additional information via the financial reporting communication channel, but it can also be used to misrepresent the firm's position. What the authors find is that similar to earnings management, conservatism can reduce the information content of financial reports if it suppresses relevant information, but it can be a desirable feature that improves economic efficiency. The approach to study earnings management, conservatism, and earnings quality is based on the information economics literature. A variety of analytical models are reviewed that capture the effects and subtle interactions of managers' incentives and rational expectations of users. The benefit of analytical models is to make precise these, often highly complex, strategic effects. They offer a rigorous explanation for the phenomena and show that sometimes conventional wisdom does not apply. The monograph is organized around a few basic model settings, which are presented in simple versions first and then in extensions to elicit the main insights most clearly. Chapter 2 presents the basic rational expectations equilibrium model with earnings management and rational inferences by the capital market. Chapter 3 is devoted to earnings quality and earnings quality metrics used in many studies. Chapter 4 studies conservatism in accounting. Finally, the authors examine the interaction between conservatism and earnings management. Each chapter ends with a section containing a summary of the main findings and conclusions.

Download or read book The Effect of Accounting Conservatism on Earning Quality written by Marselinus Asri and published by . This book was released on 2017 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose research is to examine other variables that also affect the relationship between conservatism and earnings quality. Good Corporate Governance is a set of mechanisms that can protect minority shareholders from expropriation by managers and insider shareholders with an emphasis on legal mechanisms.Data Population are companies listed in Indonesia Stock Exchange during the period 2010-20015. The sample selection is based on purposive sampling method with the purpose of obtaining a representative sample. An Alternative measure of accounting conservatism used is the instrumental variables of Accounting conservatism (VIKV) developed by Lo (2005). The quality of earnings can be measured through discretionary accruals calculated by way of setting aside total accruals (TACC) and nondiscretionary accruals (NDACC). In calculating DACC, Modified Jones Model is used because it is considered better among other models to measure earnings management (Dechow et al., 1995).The results of this study indicate that the Instrumental Variables Conservatism (VIK) has a significant positive effect on the Earning Quality. This means that management positively signals the application of accounting conservatism within the company and has an impact on improving the quality of earnings. The next investor is expected to provide more valuations by providing a high premium for the company's stock price.

Download or read book How Well Do Different Measures of Accounting Conservatism Explain Earnings Management written by Jonas Gut and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The focus of this thesis is on the measurement of earnings management and in particular on the measurement of accounting conservatism. One of its main contributions is an overview showing which recent empirical studies apply which measures of conservatism, indicating the metrics' relative importance and their status among researchers. In the second part, I test three of these measures - the market-to-book ratio, nonoperating accruals, and total accruals - for their ability to explain earnings management proxied by discretionary accruals obtained from the Modified Jones Model. I find that the explanatory power of the total accruals measure is the highest, followed by the nonoperating accruals measure and the market-to-book ratio. Other results implicate that a higher level of conservatism usually has a positive (negative) influence on income-decreasing (-increasing) earnings management and that the influence of conservatism on income-decreasing earnings management is stronger than on income-increasing earnings management. Thereby, this part of my thesis links previous findings on the interaction between accounting conservatism and earnings management to several measures (or calculation modes) of the two phenomena and enables a better understanding of their functionality.

Download or read book The Changes of Accounting Conservatism Around Earnings Restatements written by Xin Xu and published by . This book was released on 2009 with total page 266 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Comparative Research on Earnings Management Corporate Governance and Economic Value written by Vieira, Elisabete S. and published by IGI Global. This book was released on 2021-02-12 with total page 433 pages. Available in PDF, EPUB and Kindle. Book excerpt: New trends are emerging regarding earnings management and corporate governance showing similarities and striking differences in the practices of different countries and economies. These new trends currently shape the field of modern corporate governance with crucial issues being looked at in governance law and practices, accounting systems, earnings quality and management, stakeholder involvement, and more. In order to advance these new avenues in corporate governance, research looks at accounting policies firms use in different opportunistic circumstances in order to manage earnings, the corporate governance practices in different countries, firm performance, and other dimensions of companies. The understanding of these topics is beneficial in understanding the current state of different types of firms and their practices in modern times. Comparative Research on Earnings Management, Corporate Governance, and Economic Value is focused on the investigation of key challenges and perspectives of corporate governance and earnings management and outlines possible scenarios of its development. The chapters explore this new avenue of research and cover theoretical, empirical, and experimental studies related to different themes in the global context of earnings management and corporate governance. This book is ideal for economists, businesses, managers, accountants, practitioners, stakeholders, researchers, academicians, and students who are interested in the current issues and advancements in corporate governance and earnings management.

Download or read book Earnings quality and earnings management written by Sanjay Wikash Bissessur and published by Rozenberg Publishers. This book was released on 2005 with total page 217 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Earnings Quality written by Jennifer Francis and published by Now Publishers Inc. This book was released on 2008 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting. Our reason for this choice stems from the view that the capital market uses of accounting information are fundamental, in the sense of providing a basis for other uses, such as stewardship. Because resource allocations are ex ante decisions while contracting/stewardship assessments are ex post evaluations of outcomes, evidence on whether, how and to what degree earnings quality influences capital market resource allocation decisions is fundamental to understanding why and how accounting matters to investors and others, including those charged with stewardship responsibilities. Demonstrating a link between earnings quality and, for example, the costs of equity and debt capital implies a basic economic role in capital allocation decisions for accounting information; this role has only recently been documented in the accounting literature. We focus on how the precision of financial information in capturing one or more underlying valuation-relevant constructs affects the assessment and use of that information by capital market participants. We emphasize that the choice of constructs to be measured is typically contextual. Our main focus is on the precision of earnings, which we view as a summary indicator of the overall quality of financial reporting. Our intent in discussing research that evaluates the capital market effects of earnings quality is both to stimulate further research in this area and to encourage research on related topics, including, for example, the role of earnings quality in contracting and stewardship.

Download or read book Introduction to Earnings Management written by Malek El Diri and published by Springer. This book was released on 2017-08-20 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides researchers and scholars with a comprehensive and up-to-date analysis of earnings management theory and literature. While it raises new questions for future research, the book can be also helpful to other parties who rely on financial reporting in making decisions like regulators, policy makers, shareholders, investors, and gatekeepers e.g., auditors and analysts. The book summarizes the existing literature and provides insight into new areas of research such as the differences between earnings management, fraud, earnings quality, impression management, and expectation management; the trade-off between earnings management activities; the special measures of earnings management; and the classification of earnings management motives based on a comprehensive theoretical framework.

Download or read book The Influence of Accounting Conservatism Managerial Ownership Dividend Policy Size Leverage Price Earnings Ratio Price to Book Value and Earning Per Share to Earning Management written by Rowland Bismark Pasaribu and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study aims to examine the relationship of accounting conservatism, managerial ownership, dividend policy, firm size, leverage, price earnings ratio, price to book value and earnings per share to earnings management. The analysis technique used is multiple linear regressions. The data used are secondary data obtained from Indonesia Stock Exchange and various web from the company's website. The results of the study found that on managerial ownership, leverage and Price Earnings Ratio has significant effect while accounting conservatism, dividend policy, firm size, price to book value (PBV) and earnings per share (EPS) have no significant effect to earnings management.

Download or read book Shareholders Demand for Conservatism written by Francois Larmande and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Meet Beat Market Expectation Accounting Conservatism and Corporate Governance written by Bikki Jaggi and published by . This book was released on 2014 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: Accounting conservatism has been recognized as a reporting strategy that benefits shareholders and financial statement users. We hypothesize that managers in general are likely to sacrifice the benefit associated with accounting conservatism when adopting meeting/beating market expectations (hereafter MBME). Our findings show a negative association between MBME, proxied by analysts' consensus forecasts, and accounting conservatism, defined in terms of conditional conservatism (Basu, 1997; Ball and Shivakumar, 2005, 2006) and we show that such relationship is not a mechanical connection between reporting strategy and managerial incentives to report higher earnings. Further analysis show that the negative relationship still exists after controlling for expectation as well as accrual-based and real earnings management. However, we document that G-index (Gompers et al., 2003), reflecting corporate governance in terms of anti-takeover provisions, has a significant impact on the negative association between accounting conservatism and MBME. Such finding shows that firms with less anti-takeover provisions, proxied by G-index, are less likely to sacrifice the benefit associated with conservative accounting for MBME.

Download or read book The Allowance for Uncollectible Accounts Conservatism and Earnings Management written by Scott B. Jackson and published by . This book was released on 2017 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the interrelation between conservatism and earnings management by examining the allowance for uncollectible accounts and its income statement counterpart, bad debt expense. We find that the allowance is conservative and that it has become more conservative over time. Conservatism may, however, facilitate earnings management. We find that firms manage bad debt expense downward (and even record income-increasing bad debt expense) to meet or beat analysts' earnings forecasts and that conservatism accentuates the extent to which firms manage bad debt expense. Further, we find that firms manage bad debt expense downward by drawing down previously recorded over-accruals of bad debt expense that have accumulated on the balance sheet. An implication of our study is that tighter limits on the amount by which firms are permitted to understate net assets may reduce their ability to manage earnings.

Download or read book Accounting Conservatism and the Stock Market written by Carlo D’Augusta and published by Springer Nature. This book was released on with total page 89 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book On the Relation between Conservatism in Accounting Standards and Incentives for Earnings Management written by Qi Chen and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the role of conservative accounting standards in alleviating rational yet dysfunctional unobservable earnings manipulation. We show that when accounting numbers serve both the valuation role (in which potential investors use accounting reports to assess a firm's expected future payoff) and the stewardship role(in which current shareholders rely on the same reports to monitor their risk-averse manager), current firm owners have incentives to engage in earnings management. Such manipulation reduces accounting numbers' stewardship value and leads to inferior risk-sharing. We then show that risk-sharing, and hence contract efficiency, can be improved under a conservative accounting standard where, absent earnings management, accounting earnings represent true economic earnings with a downward bias, compared to under an unbiased standard where, absent earnings management, accounting earnings represent true economic earnings without bias.

Download or read book Conservatism in Accounting written by Ross L. Watts and published by . This book was released on 2003 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines conservatism in accounting. Conservatism is defined as the differential verifiability required for recognition of profits versus losses. In its extreme form the definition incorporates the traditional conservatism adage: quot;anticipate no profit, but anticipate all losses.quot; Despite criticism from many quarters, including standard-setters, conservatism appears not only to have survived in accounting for many centuries, but also to have increased in the last 30 years.The paper lays out the various alternative explanations for conservatism: contracting; shareholder litigation; taxation and accounting regulation (e.g., SEC and FASB). It also summarizes the empirical evidence on the existence of conservatism and the extent to which it is consistent with the alternative explanations for conservatism. The evidence is consistent with both the existence of conservatism and its increase in recent years. Contracting and shareholder litigation explanations appear to be important in these results. The evidence on the effect of taxation and regulation is weaker, but is still consistent with those explanations playing a role. Earnings management could also produce some of the evidence on conservatism, but it is unlikely to be the major explanation.The explanations and evidence have important implications for accounting regulators (SEC and FASB). First, the contracting explanation implies that conservatism will exist even in the absence of formal contractual use of financial statements. As long as income and net asset measures have meaning and are used in a way that affects management's welfare, conservatism is likely to be an optimal accounting principle. Absent differential verifiability, financial measures such as income and net assets are likely to be subject to sufficient manipulation to render them meaningless. Second, recent FASB moves to apply rules such as mark-to-market without appropriate concern for verifiability are likely to be disastrous for the FASB and capital markets. Third, attempts to introduce unverifiable estimates of future cash flows into the financial statements are likely to just as disastrous.