Earnings Management, Corporate Investments, and Stock Returns

2005 ◽  
Author(s):  
Feixue Xie ◽  
K. C. John Wei
Keyword(s):  
Earnings Management ◽  
Stock Returns ◽  
Corporate Investments

scholarly journals The Impact of Earnings Management on Stock Returns for Listed Industrial Firms on the Amman Stock Exchange

2019 ◽  
Vol 9 (3) ◽  
pp. 1
Author(s):  
Ahmed M. Al Omush ◽  
Walid M Masadeh ◽  
Rasha M. Zahran
Keyword(s):  
Earnings Management ◽  
Stock Returns ◽  
Management Practices ◽  
Stock Exchange ◽  
Financial Statements ◽  
Industrial Firms ◽  
Significance Level ◽  
Amman Stock Exchange ◽  
Study Population ◽  
Operating Cash Flow

This study aims to investigate the impacts of earning management on the stock returns of listed industrial firms on the Amman Stock Exchange, with the observance of (firm size and operating cash flow) as control variables for the study. In order to fulfill the purposes of this study, the researcher utilized (Jones model) and (Modified Jones model) to measure earning management through reliance on discretionary accruals as evidence of earnings management practices, and utilize (Market Return On the Stock model) to measure stock returns, and the study population was Mining and Extraction Industries firms also Food and Beverages firms listed in Amman Stock Exchange, the study was conducted on a sample of 18 firms which represents 75% of the study population for the period from 2014 to 2018, In addition to using descriptive and analytical approach to data collection, analysis, and testing hypotheses through financial statements of the firms in the study, the researcher has used the Statistical Package for Social Sciences (SPSS) program to test the hypotheses. This study creates many results some of which are: there is an insignificant relationship between earnings management practices and stock returns for listed industrial firms in Amman Stock Exchange during the study period at the significance level of 5%, Which reflects the poor efficiency in Amman Stock Exchange and not the information contained in the financial statements issued and therefore not impact stock prices, which in turn affects the stock returns, and there is an insignificant relationship between stock returns and operating cash flow at the level of significance of 5%, In addition found significant correlation between firm size and stock returns at the significance level of 1%. The researcher presented a set of recommendations; the following are most valuable: the importance of increasing the awareness of the relevant parties about the unreliability of financial statements issued by industrial companies listed on the Amman Stock Exchange in existence of the earnings management practice and not reflecting the information contained in the financial statements on prices and stock returns by holding seminars, conferences and meetings also Activating the role of audit committees further to be able to detect the practice of earnings management and decrease it.

scholarly journals The Effect of Earnings Management to Stock Return on Company Listed in Indonesia

2021 ◽  
Vol 8 (2) ◽  
pp. 194-201
Author(s):  
Sukiantono Tang ◽  
Wini Alvita
Keyword(s):  
Data Collection ◽  
Earnings Management ◽  
Stock Returns ◽  
Stock Return ◽  
Management Practices ◽  
Descriptive Statistics ◽  
Accurate Information ◽  
Financial Report ◽  
Purposive Sampling

The financial report should report accurate information about the company situation so it can be utilized properly by stakeholders. This study aims to examine the effect of earnings management on stock returns. The data collection of this study used purposive sampling. A total of 1335 data were collected and used as research samples. The data that has been collected is then tested to obtain the results. Furthermore, in analyzing the data, the method used is descriptive statistics. Based on the analysis, the results of this study showed that earnings management has a significant effect on the stock return variable. This is because earnings management practices can trick investors into making investment transactions.

Do market participants value earnings management? An analysis using the quantile regression method

2019 ◽  
Vol 45 (1) ◽  
pp. 103-123 ◽  
Author(s):  
Leon Li ◽  
Nen-Chen Richard Hwang
Keyword(s):  
Quantile Regression ◽  
Earnings Management ◽  
Stock Returns ◽  
Stock Prices ◽  
Discretionary Accruals ◽  
Earnings Manipulation ◽  
Content Type ◽  
Market Participants ◽  
Gains And Losses ◽  
Quantile Regression Method

PurposeThe purpose of this paper is to postulate that market participants’ views on the nature of discretionary accruals as earnings management or earnings manipulation could relate to a rise or a fall in a firm’s stock prices.Design/methodology/approachApplying the quantile regression and measuring gains and losses according to the stock returns, this study shows that the relation between earnings manipulation and stock returns is non-uniform and it varies significantly across various quantiles of the latter.FindingsThe empirical results imply a positive (negative) |DA|-RETURN relation for stocks experiencing a rise (fall) in stock prices. This finding is consistent with the notion that market participants lean towards (become) trend followers (fundamentalists) when their stocks price rise (fall) and, thus, positively reward (negatively punish) discretionary accruals.Originality/valueUsing the behavioural heterogeneity of market participants as a research framework, this paper contributes to the literature by demonstrating that market participants’ decisions to positively reward (negatively punish) earning management behaviour depend on their perceptions on nature of discretionary accruals (earnings management vs earnings manipulation).

scholarly journals The impact of earnings management on market liquidity

2020 ◽  
Vol 17 (2) ◽  
pp. 389-396
Author(s):  
Do Thi Van Trang ◽  
Dinh Hong Linh
Keyword(s):  
Earnings Management ◽  
Stock Returns ◽  
Stock Price ◽  
Stock Exchange ◽  
Fixed Effect Model ◽  
Market Liquidity ◽  
Listed Firms ◽  
Daily Stock Returns ◽  
The Impact ◽  
Dollar Volume

This article investigates the impact of earnings management on market liquidity measured by the depth of the market. Managers have desired to provide amazing performance of companies, manage their earnings through non-discretionary accruals. Consequently, investors have trouble evaluating the stock value and misunderstanding of the market liquidity because of manipulated information.To this aim, the fixed-effect model (FEM) is implemented to analyze the financial information of 170 listed firms on the Vietnam Stock Exchange over the period 2013–2016. The empirical results emphasized that market liquidity is influenced by earnings management that means the higher level of earnings management, the better equity liquidity. The findings provide additional insight into the determinants of stock liquidity such as earnings management, firm size, daily trading dollar volume of stock, average daily trading dollar volume of the firm, daily returns of stock, daily stock returns, average closing stock price of the firm.

scholarly journals MANAJEMEN LABA, RETURN SAHAM, DAN KINERJA OPERASI SEBAGAI PEMODERASI

2017 ◽  
Vol 15 (2) ◽  
pp. 133
Author(s):  
Farid Addy Sumantri ◽  
Purnamawati .
Keyword(s):  
Earnings Management ◽  
Stock Returns ◽  
Initial Public Offering ◽  
Stock Return ◽  
Operating Performance ◽  
Abnormal Returns ◽  
Return On Assets ◽  
One Year ◽  
Public Offering ◽  
The Relationship

<p><em>The purpose of this study was to determine the indications of the practice of earnings management at the time of the IPO, one year after the IPO, and two years after the IPO. This study also examined the effect of earnings management on stock returns and operating performance in moderating the relationship between earnings management and stock returns.</em></p><p><em>The study sample comprised 33 firms that go public in the year 2007 to 2011 using a purposive sampling method. Earnings management is proxied by discretionary accruals using the Modified Jones Model, which used proxy for the stock return is cummulative abnormal returns (CAR), while for the company's operating performance used proxy for the return on assets (ROA).</em></p><p><em>The results showed that there were indications of earnings management at the time of the IPO, one year after the IPO, and two years after the IPO with a lower profit rate. No effect on earnings management is proxied by stock return cummulative abnormal returns (CAR). Operating performance of the company also can not moderate the relationship between earnings management with stock return.</em></p><p><em> </em></p><p><em>Keywords: Earning Management, Initial Public Offering, Cummulative Abnormal Return, </em><em>Return On Asset</em></p>

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.

scholarly journals Use Of Earnings Information For Stock Pricing In Different Market Cycles: The Effect Of Discretionary Accruals

2011 ◽  
Vol 7 (5) ◽  
Author(s):  
Alireza Daneshfar ◽  
Mohammad J. Saei
Keyword(s):  
Earnings Management ◽  
Stock Returns ◽  
Stock Prices ◽  
Discretionary Accruals ◽  
Ratio Analysis ◽  
Test Results ◽  
Font Size ◽  
True Nature ◽  
Earnings Information ◽  
Abnormal Stock Returns

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">This study examines the association between stock prices and discretionary accruals in different stock market cycles and presents evidence about the discrepancy in prior research that investors were able to identify earnings management in some cases, but not in some other cases. We argue that investors&rsquo; reaction to the true nature of EPS changes may be different in different market cycles. We suggests that investors pay less attention to the nature of EPS changes in an optimistic cycle, and are more critical in neutral and pessimistic cycles. Therefore, investors are more likely to detect and count for any earnings management in a neutral or pessimistic cycle than in an optimistic cycle. Using the U.S. quarterly data from July 01, 1997 to June 29, 2001, three market cycles were identified: optimistic, neutral and pessimistic. The test results indicated that the association between discretionary accruals and abnormal stock returns were insignificant in the neutral market cycle, significant and positive in the optimistic cycle and significant and negative in the pessimistic cycle. These findings indicate that investors tend to ignore the income-increasing effect of discretionary accruals on EPS changes in an optimistic market. The finding suggests that a more delegate and technical analysis of EPS changes is required when earnings information is used for stock pricing. It also suggests that a consideration of market cycle effect on investors&rsquo; use of EPS could improve the earnings-based ratio analysis. The findings propose that researchers interested in investigating the association between stock prices and earnings management should control for the effect of the market cycle during which their samples are drawn. </span></span></p>

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