SFAS 133 and income smoothing via discretionary accruals: The role of hedge effectiveness and market volatility

2017 ◽  
Vol 29 (2) ◽  
pp. 105-130 ◽  
Author(s):  
Abiot Tessema ◽  
Rogier Deumes
Keyword(s):  
Discretionary Accruals ◽  
Income Smoothing ◽  
Market Volatility ◽  
Sfas 133

The Stewardship Role of Analyst Forecasts, and Discretionary Versus Non-discretionary Accruals

2013 ◽  
Vol 22 (2) ◽  
pp. 257-296 ◽  
Author(s):  
Peter O. Christensen ◽  
Hans Frimor ◽  
Florin Şabac
Keyword(s):  
Discretionary Accruals ◽  
Analyst Forecasts

scholarly journals The Combined Effects of Financial Derivatives and Discretionary Accruals on the Value Relevance of Earnings and the Book Value of Equity

2015 ◽  
Vol 17 (2) ◽  
pp. 179 ◽  
Author(s):  
Etty Murwaningsari ◽  
Sidharta Utama ◽  
Hilda Rossieta
Keyword(s):  
Value Relevance ◽  
Positive Association ◽  
Wald Test ◽  
Discretionary Accruals ◽  
Financial Derivatives ◽  
Combined Effects ◽  
Price Model ◽  
Negative Effects ◽  
Book Value ◽  
Sfas 133

This study aimed to understand (1) the association between the use of discretionary accruals and financial derivatives, taking into consideration the implementation of revised PSAK 55 (1999), which was adopted from SFAS 133; (2) the combined effects of derivatives and discretionary accruals on the value relevance of earnings and equity. The analysis used panel data regressions and the Wald test over the period from 2001-2008. The results showed a positive or complementary association between derivatives and discretionary accruals. The positive association implied that managers tended to intensify the use of discretionary accruals to offset a higher use of derivatives. Price and return models demonstrated negative significant effects of derivatives on the value relevance of earnings. The return model showed negative significant effects of discretionary accruals on the value relevance of earnings but negative effects on the value relevance of equity with the price model.

scholarly journals Remittances and Income Smoothing

2011 ◽  
Vol 101 (3) ◽  
pp. 582-587 ◽  
Author(s):  
Catalina Amuedo-Dorantes ◽  
Susan Pozo
Keyword(s):  
Developing Countries ◽  
Household Income ◽  
Borrowing Constraints ◽  
Income Smoothing ◽  
Reverse Causality ◽  
Income Volatility ◽  
Household Level ◽  
Level Data ◽  
Main Motive

Due to inadequate savings and binding borrowing constraints, income volatility can make households in developing countries particularly susceptible to economic hardship. We examine the role of remittances in either alleviating or increasing household income volatility using Mexican household level data over the 2000 through 2008 period. We correct for reverse causality and endogeneity and find that while income smoothing does not appear to be the main motive for sending remittances in a non-negligible share of households, remittances do indeed smooth household income on average. Other variables surrounding income volatility are also considered and evaluated.

The role of audit committees in mitigating earnings management: evidence from Jordan

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Taha Almarayeh ◽  
Modar Abdullatif ◽  
Beatriz Aibar-Guzmán
Keyword(s):  
Developing Countries ◽  
Earnings Management ◽  
Audit Committee ◽  
Discretionary Accruals ◽  
Least Square ◽  
Audit Committees ◽  
Institutional Setting ◽  
Content Type ◽  
The Impact

PurposeThis study examines the relationship between audit committees (ACs) and earnings management (EM) in the developing country context of Jordan. In particular, it investigates whether audit committee attributes, including their size, independence, expertise and meetings, are able to restrict discretionary accruals as a proxy for EM.Design/methodology/approachThe generalized least square (GLS) regression was used to study the association between audit committee attributes and discretionary accruals, as a proxy of EM, for a sample of industrial firms listed on the Amman Stock Exchange (ASE) during the period 2012–2020. Data were obtained from the firms' annual reports.FindingsThe regression results indicate that audit committee independence is the only audit committee attribute that seems to improve the effectiveness of ACs, in that it is significantly associated with less EM, while other audit committee attributes that were tested do not show statistically significant associations.Research limitations/implicationsIn emerging markets, like Jordan, ACs may not be an efficient monitoring mechanism; therefore, it can be argued that the prediction made by the agency theory about the role of ACs in mitigating opportunistic EM activities does not necessarily apply to all contexts.Practical implicationsA better understanding of audit committee effectiveness in developing countries could help regulators in these countries assess the impact of planned corporate governance (CG) reforms and to better monitor and enhance the performance of ACs.Social implicationsIn a setting characterized by closely held companies, high power distance and low demand for high-quality CG mechanisms, this study contributes to understanding how this business system operates, and how improving CG mechanisms could be successful in such cultures.Originality/valueThis study investigates the under-researched relationship between audit committee characteristics and EM in developing countries. In so doing, it aims to provide new insights into this relationship within the developing context case of Jordan, including if and how the institutional setting influences this relationship.

Managerial Equity Holdings and Income Smoothing Incentives

2017 ◽  
Vol 31 (1) ◽  
pp. 195-218 ◽  
Author(s):  
Sydney Qing Shu ◽  
Wayne B. Thomas
Keyword(s):  
Risk Taking ◽  
Agency Problems ◽  
Discretionary Accruals ◽  
Stock Option ◽  
Income Smoothing ◽  
Future Earnings ◽  
Future Performance ◽  
Excessive Risk Taking ◽  
Excessive Risk ◽  
Equity Holdings

ABSTRACT We explore how managerial stock holdings and option holdings affect CEOs' income smoothing incentives. Given the different roles of stock holdings and option holdings in solving agency problems, managers may smooth past earnings using discretionary accruals for the purpose of revealing information to help investors better predict future earnings or for the purpose of hiding volatility of past earnings. We find the association between past smoothing and predictability of future earnings is increasing (decreasing) in CEO stock (option) holdings. Results are consistent with stock holdings aligning the interests of managers and shareholders, and managers using discretionary accruals to smooth past earnings to reveal information to investors about future performance. In contrast, option holdings have been linked with excessive risk taking by managers, and managers use discretionary accruals to mask volatility of less predictable earnings. We demonstrate that income smoothing can be informative or opportunistic, depending on the incentives of CEOs.

Sophistication of Chinese Mutual Funds and the Mispricing of Accruals

2018 ◽  
Vol 18 (1) ◽  
pp. 97-120 ◽  
Author(s):  
Jiajia Fu
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
Stock Price ◽  
Discretionary Accruals ◽  
Institutional Holdings ◽  
One Year ◽  
The One ◽  
High Level ◽  
Price Responsiveness

ABSTRACT This study examines the role of mutual funds in the pricing of accruals in China's stock market to evaluate the sophistication of Chinese mutual funds. Using a sample of A-share stocks in China from 2003 to 2011, I find that the mispricing of accruals is concentrated in firms with large mutual fund holdings. This result differs from a number of U.S. studies documenting a positive relation between institutional holdings and stock price efficiency. In an effort to explain this result, I provide evidence that mutual funds in China fixate on earnings and fail to understand the one-year-ahead earnings implication of accruals. Specifically, I find that the persistence of accruals is overpriced in stocks with a high level of mutual fund ownership. The mispricing of accruals in these stocks is largely driven by discretionary accruals and is related to their high stock price responsiveness to earnings. JEL Classifications: M41; G12.

scholarly journals The factors affecting the bank’s credit impairment losses by adopting IAS on PSAK 55 in Indonesia

2020 ◽  
Vol 22 (3) ◽  
Author(s):  
Sparta Sparta ◽  
Nadya Trinova
Keyword(s):  
Stock Exchange ◽  
Positive Influence ◽  
Vital Role ◽  
Income Smoothing ◽  
Loan Loss ◽  
Factors Affecting ◽  
Loan Loss Provisions ◽  
Ias 39 ◽  
The Stability

Loan loss provisions in banks plays a vital role in maintaining the stability and health of banks, as well as fulfilling the function of banks in channeling public funds. This study aims to determine the effect of income smoothing and the behavior of procyclicality against reserves of credit losses losses, as well as the role of adoption of IAS 39 in PSAK 55 in moderating the influence of these two variables. The object of this study are conventional commercial banks that are listed on the Indonesia Stock Exchange within the research period of 2008-2017. By using purposive sampling method, I obtained 20 bank samples and 196 observations. The hypotheses in this research are tested using multiple regression analysis. This study shows that income smoothing has a positive influence on loan loss provisions, whereas procyclicality and IAS 39 adoption in PSAK 55 do not affect loan loss provisions significantly. Meanwhile, IAS 39 adoption in PSAK 55 weakens the positive influence of income smoothing, however it cannot moderate the influence of procyclicality on loan loss provisions.  

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