A New Perspective on Fixed Asset Write-Offs -- When is Earnings Management Optimal

2013 ◽  
Author(s):  
Alexander D.F. Lahmann ◽  
Lena Siggelkow ◽  
Henning Zülch
Keyword(s):  
Earnings Management ◽  
Fixed Asset ◽  
New Perspective

Does Earnings Management Affect Firms’ Investment Decisions?

2008 ◽  
Vol 83 (6) ◽  
pp. 1571-1603 ◽  
Author(s):  
Maureen F. McNichols ◽  
Stephen R. Stubben
Keyword(s):  
Earnings Management ◽  
Investment Decisions ◽  
Financial Statements ◽  
Fixed Asset ◽  
Public Companies ◽  
Large Sample

ABSTRACT: This paper examines whether firms manipulating their reported financial results make suboptimal investment decisions. We examine fixed asset investments for a large sample of public companies during the 1978–2002 period and document that firms that manipulate their earnings—firms investigated by the SEC for accounting irregularities, firms sued by their shareholders for improper accounting, and firms that restated financial statements—over-invest substantially during the misreporting period. Furthermore, following the misreporting period, these firms no longer over-invest, consistent with corrected information leading to more efficient investment levels. We find similar patterns for firms with high discretionary revenues or accruals. Our findings suggest that earnings management, which is largely viewed as targeting parties external to the firm, can also influence internal decisions.

scholarly journals ACCOUNTING STANDARDS FOR FIXED ASSETS OF U.S. GAAP AND IFRS: COVID-19 PANDEMIC AND EARNINGS MANAGEMENT PERSPECTIVES

2021 ◽  
Vol 6 (1SP) ◽  
pp. 122
Author(s):  
Andreas Vernando
Keyword(s):  
Earnings Management ◽  
Accounting Standards ◽  
Fair Value ◽  
Faithful Representation ◽  
Fixed Asset ◽  
Accounting Standard ◽  
Asset Value ◽  
Fixed Assets ◽  
Value Measurement

FASB and IASB have differences in setting the accounting standard for fixed asset. The FASB does not allow firms to restore the asset value that has been written down, while the IASB allow companies to recover the asset values that has been written down. These differences have distinct implication to depict the COVID-19 pandemic phenomenon and prevent earnings management that will affect the qualitative characteristics of the faithful representation. Therefore, this study aims to analyze the fixed asset accounting standards of U.S. GAAP or IFRS which is more optimal to improve the faithful representation in the case of the COVID-19 pandemic and earnings management. Based on an analysis of the theory and literature review, this study conclude that the fixed assets accounting standard of IFRS is more optimal to represent the COVID-19 pandemic faithfully than that of U.S. GAAP. This is because IFRS allows for recovery of impairment losses. In addition, the fixed asset accounting standard of U.S. GAAP is more optimal than that of IFRS for preventing earnings management so as to improve the quality of faithful representation of the fixed asset value. This is because the fair value measurement for fixed assets involves estimation and subjectivity of the asset appraiser enhancing the possibility of earnings management.

scholarly journals FAKTOR – FAKTOR YANG MEMPENGARUHI PEMILIHAN MODEL REVALUASI SEBAGAI MODEL PENGUKURAN ASET TETAP DAN DAMPAKNYA TERHADAP MANAJEMEN LABA

2018 ◽  
Vol 10 (2) ◽  
Author(s):  
Rini Martini ◽  
Kurniawati Kurniawati
Keyword(s):  
Earnings Management ◽  
Significant Influence ◽  
Stock Exchange ◽  
Binary Logistic Regression ◽  
Fair Value ◽  
Fixed Asset ◽  
Statistical Tool ◽  
Public Companies ◽  
Significance Level ◽  
Company Value

<p><em>Since the emergence of the revaluation model as another option in the measurement of fixed assets, the participation of public companies in Indonesia in the implementation of fair value began to increase.   The aim of this study is to investigate factors that affecting the decisions made by the company to perform revaluation model of fixed asset and the effect of revaluation model on earnings management.</em></p><p><em> </em></p><p><em><span style="font-size: small;">The sample used in this research were non financial companies listed at Indonesia Stock Exchange   2013-2015. Samples are collected by purposive sampling and resulted in 180 firms as the final sample. The statistic method used was binary logistic regression method, with hypotheses testing of statistic t using a significance level (α) = 5%. The statistical tool used is SPSS 23.  </span></em></p><p><em>The result of this research indicates that company value has negative significant influence and  fixed asset intensity has positive significant influence on revaluation model implementation. Meanwhile leverage and liquidity do not have significant influence on revaluation model implementation. Revaluation model implementation does not have significant influence on earnings management. This research also showed that asset revaluation implementation can be used to reduce information asymmetry and give positive signal to financial statement users. But apparently asset revaluation implementation does not have significant influence with earnings management because fair value implementation has not been optimal in Indonesia's public company.</em></p><em><strong>Keywords : </strong>Fixed asset, revaluation model, leverage, liquidity, company value, fixed asset intensity, earnings management.</em>

scholarly journals Factors Affecting Earnings Management in the Indonesian Stock Exchange

2017 ◽  
Vol 2 (2) ◽  
pp. 08-14
Author(s):  
Nico Alexander ◽  
Hengky Hengky
Keyword(s):  
Earnings Management ◽  
Firm Size ◽  
Audit Quality ◽  
Stock Exchange ◽  
Auditor Independence ◽  
Jel Classification ◽  
Firm Age ◽  
Fixed Asset ◽  
Size Firm ◽  
Asset Turnover

Objective - The purpose of this research is to analyze the effect of growth, leverage, fixed asset turnover, profitability, firm size, firm age, industry, audit quality, and auditor independence toward earnings management. Methodology/Technique - The population of this research consist of various sectors of non-financial companies that were listed on the Indonesian Stock Exchange (IDX) between 2013 and 2015. The research uses three recent years of data and tests variables that have not been used by prior research. The sample was chosen by using a purposive sampling method. The hypothesis is tested using multiple regression with an SPSS program to investigate the influence of each independent variable to earnings management. Findings - The research results show that return on assets influences earnings management and growth, leverage, fixed asset turnover, profitability, firm size, firm age, industry, audit quality, and auditor independence do not influence earnings management. Novelty - The study supports that the manager in a company will engage in earnings management to receive a bonus from investors because they have received a higher profit. Type of Paper: Empirical Keywords: Earnings Management; Growth; Leverage; Fixed Asset Turnover; Profitability; Firm Size; Firm Age; Audit Quality; Auditor Independence; Industry JEL Classification: L25, M12, M41.

Minority shareholder participation and earnings management

2019 ◽  
Vol 9 (1) ◽  
pp. 73-109 ◽  
Author(s):  
Dongming Kong
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Minority Shareholders ◽  
Excessive Pressure ◽  
Data Set ◽  
Content Type ◽  
External Monitoring ◽  
Corporate Decisions ◽  
Alternative Measures ◽  
New Perspective

PurposeThe purpose of this paper is to test a catering theory by examining impacts of minority shareholders’ pressures on earnings management (EM), and attempt to answer: what is the role of minority shareholders participation (MSP) in corporate governance? and does MSP serve as an external monitor to managers, or does it put excessive pressure on them?Design/methodology/approachUsing a novel online voting data set in China’s stock market, the author constructs the measure of MSP, and regress the EM on MSP. To address the endogeneity, the author introduces propensity score matching and difference-in-difference methods, instrumental variables, and Heckman estimation to show that the results are robust to different specifications and alternative measures.FindingsThe author documents that: MSP plays limited role in external monitoring; and firms facing high MSP levels tend to manage earnings more actively. In addition, information asymmetry, proposals’ importance, managerial incentives, and CEO financial expertise significantly affect firms’ catering behaviors.Originality/valueThis paper contributes to different strands of the literature. First, the finding significantly supports the catering hypothesis from a new perspective of EM. Second, the author contributes to a hotly debated issue in corporate governance: whether minority shareholders should be granted increased participation in corporate decisions? The results also provide timely empirical evidence for government regulators who are concerned about the costs and benefits of granting minority shareholders direct control over corporate decisions.

scholarly journals CEO Succession, Investor Expectations, and Real Earnings Management

2015 ◽  
Vol 7 (2) ◽  
pp. 120
Author(s):  
Chaur-Shiuh Young ◽  
Yueh-Ju Lin ◽  
Fei-Liang Chien ◽  
Chia-Hui Chen
Keyword(s):  
Earnings Management ◽  
Market Reaction ◽  
Market Volatility ◽  
Real Earnings Management ◽  
Ceo Succession ◽  
Stock Market Volatility ◽  
Market Reactions ◽  
Future Performance ◽  
New Perspective ◽  
Ceo Successions

<p>Recently, U.S. firms are switching CEO at the fastest pace and these events often cause severe stock market volatility on the uncertainty of the firm’s future performance. This study investigates whether inverse market reaction on CEO succession will induce earnings management of new CEOs in order to protect their reputational and career prospects. From a sample of 2,418 firm-years during the post-SOX period of 2003 to 2012 by applying the regression analysis, we investigate two associations of real earnings management (REM) with CEO successions and with its market reaction respectively. Our results suggest new CEOs are more careful when manipulate earnings through REM activities. However, REM is negatively associated with market expectations on CEO successions, implying new CEOs may utilize REM to reverse the first bad impressions held by investors. We provide a new perspective with regard to market reactions to CEO successions, by examining how and why new CEOs may choose to manipulate earnings.</p>

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