Does the Use of Financial Derivatives Affect Earnings Management Decisions?

2000 ◽  
Author(s):  
Jan Barton
Keyword(s):  
Earnings Management ◽  
Financial Derivatives ◽  
Management Decisions

The Effect of Geographic Distance on Earnings Management Decisions

2022 ◽  
Author(s):  
Matthew J. Hayes ◽  
Michael J. Mowchan
Keyword(s):  
Earnings Management ◽  
Geographic Distance ◽  
Management Styles ◽  
Experimental Setting ◽  
Management Decisions ◽  
Initial Experiment ◽  
Country Factors ◽  
Acceptable Method ◽  
Distant Location ◽  
Willingness To Use

Prior research has found evidence that country factors and management styles influence earnings management decisions in various geographic locations. Extending this research, we utilize an experimental setting to isolate the effect of geographic distance on the willingness to manage earnings in a near/distant location. In an initial experiment, we find less acceptable earnings management methods generate greater concerns about the method (ethicality and riskiness) leading to less willingness to manage earnings. Yet, greater geographic distance between the decisionmaker and reporting location attenuates these concerns, resulting in increased willingness to use a less acceptable method. In contrast, individuals are willing to use a more acceptable method to manage earnings regardless of geographic distance. These findings are consistent with construal level theory (CLT) and are corroborated in a second experiment where we find that greater geographic distance reduces managers’ focus on the means of earnings management, thereby reducing concerns about the method.

scholarly journals The Effects of Financial Derivatives on Earnings Management and Market Mispricing

2019 ◽  
Vol 21 (3) ◽  
pp. 289
Author(s):  
Oktavia Oktavia ◽  
Sylvia Veronica Siregar ◽  
Ratna Wardhani ◽  
Ning Rahayu
Keyword(s):  
Earnings Management ◽  
Stock Returns ◽  
The Philippines ◽  
Financial Derivatives ◽  
Earnings Expectations ◽  
Market Mispricing ◽  
Hedge Accounting ◽  
Country Analysis ◽  
The Difference ◽  
Flow Components

This study aims to examine the effects of financial derivatives on earnings management and market mispricing. A cross-country analysis was applied within the scope of four ASEAN (Association of Southeast Asian Nations) countries that comply with IAS 39, consisting of the Philippines, Indonesia, Malaysia, and Singapore. A sample of 1,395 firm-years of companies using financial derivatives were engaged for study and the evidence shows that the use of financial derivatives for hedging purposes decreases the magnitude of the earnings management. In addition, this study also supports the idea that earnings expectations embedded in the stock returns of companies using financial derivatives, that meet the hedge accounting criteria, reflect the difference in the persistence of cash flow components more accurately than those using financial derivatives for speculative purposes.

Evidence from Auditors about Managers' and Auditors' Earnings Management Decisions

2002 ◽  
Vol 77 (s-1) ◽  
pp. 175-202 ◽  
Author(s):  
Mark W. Nelson ◽  
John A. Elliott ◽  
Robin L. Tarpley
Keyword(s):  
Earnings Management ◽  
Financial Statements ◽  
Management Decisions ◽  
Big 5

This paper reports analyses of data obtained using a field-based questionnaire in which 253 auditors from one Big 5 firm recalled and described 515 specific experiences they had with clients who they believe were attempting to manage earnings. This approach enables us to analyze separately managers' decisions about how to attempt earnings management and auditors' decisions about whether to prevent earnings management by requiring adjustment of the financial statements. Our results indicate that managers are more likely to attempt earnings management, and auditors are less likely to adjust earnings management attempts, which are structured (not structured) with respect to precise (imprecise) standards. We also find that managers are more likely to make attempts that increase current-year income, but auditors are more likely to require that those attempts be adjusted, that managers are more likely to make attempts that decrease current-year income with unstructured transactions and/or when standards are imprecise, and that auditors are more likely to require adjustment of attempts that they identify as material or that are attempted by small clients.

scholarly journals Career concerns and earnings management

2020 ◽  
Vol 2 (1) ◽  
pp. 1
Author(s):  
Elizabeth Demers ◽  
Chong Wang
Keyword(s):  
Labor Market ◽  
Earnings Management ◽  
Early Years ◽  
Career Concerns ◽  
Management Model ◽  
Earnings Manipulation ◽  
Management Decisions

Motivated by the disconnect between survey evidence documenting that executives prioritize implicit contracting (i.e., labor market-based career concerns) when making earnings management decisions (Graham et al., 2005) and the extant literature’s focus on explicit contracting to explain earnings manipulation, we analytically examine the role of managerial career concerns in earnings management. Building on Holmstrom (1982, 1999), we present a career concerns-based earnings management model that incorporates the unique reversing nature of earnings management. A key insight derived from the model is that whether the predictions of a traditional career concerns model prevail, which is to say that managers engage in more income-increasing behavior in their early years, critically depends upon the reversal characteristics of the earnings management vehicle chosen.

The Career Imprint of the CEOs’ Previous Work Environment in Earnings Management Decisions

2021 ◽  
Vol 2021 (1) ◽  
pp. 16329
Author(s):  
Zagdbazar Davaadorj ◽  
Bolortuya Enkhtaivan ◽  
Wei Ning ◽  
Albi Alikaj
Keyword(s):  
Earnings Management ◽  
Work Environment ◽  
Management Decisions
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