Forcing responsibility? Examining earnings management induced by mandatory corporate social responsibility: evidence from India

Purpose This study aims to investigate the impact of mandatory corporate social responsibility (CSR) spending legislation on the earnings management strategies of firms. Design/methodology/approach The authors use panel data regression models to analyze the data for this study. This study covers the post-legislation period, which spans over five years from the financial year ending March 2015 to the financial year ending March 2019. Findings The results show that firms manipulate accounting measures to avoid breaching the cut-off criteria for mandatory CSR. In particular, the results show that firms operating around the operating revenue threshold misclassify operating revenue as non-operating revenue. In contrast, firms operating around the net worth and net profit thresholds do downward real and accrual earnings management. These results are consistent with several robustness measures. Originality/value To the best of the authors’ knowledge, this is the first study that examines the impact of mandatory CSR spending on earnings management.

Quantifying the Importance of Firms by Means of Reputation and Network Control

As recently argued in the literature, the reputation of firms can be channeled through their ownership structure. We use this relation to model reputation spillovers between transnational companies and their participated companies in an ownership network core of 1,318 firms. We then apply concepts of network controllability to identify minimum sets of driver nodes (MDSs) of 314 firms in this network. The importance of these driver nodes is classified according to their control contribution, their operating revenue, and their reputation. The latter two are also taken as proxies for the access costs when utilizing firms as driver nodes. Using an enrichment analysis, we find that firms with high reputation maintain the controllability of the network but rarely become top drivers, whereas firms with medium reputation most likely become top driver nodes. We further show that MDSs with lower access costs can be used to control the reputation dynamics in the whole network.

Influence of firm size and firm age on classification shifting: an empirical study on listed firms in India

Purpose Prior studies document that managers engaged in shifting of non-operating revenue to operating revenue (revenue shifting) and shifting of operating expenses to non-operating expenses (expense shifting (ES)) within income statement to report inflated operating profits of firms. This study aims to identify the factors affecting revenue shifting and ES. Design/methodology/approach The operating revenue model (Malikov et al., 2018) and the core earnings expectation model (McVay, 2006) are used for measuring revenue shifting and ES, respectively. The panel data regression models are used to analyze the data for this study. Findings The study results show that large and old firms are engaged in revenue shifting, whereas small and young firms prefer ES over revenue shifting for reporting inflated operating profits. These results imply that firms choose the shifting strategy based on relative advantage and ease in execution. The results are robust after controlling for accruals earnings management, real earnings management and endogeneity bias. Practical implications It suggests investors minutely investigate the operating performance metrics of initial public offering firms that are relatively small and young while buying their shares. Besides, findings suggest accounting standard setters make more mandatory disclosure requirements for recording expense and revenue items in the income statement to curb this corporate misfeasance of classification shifting. Originality/value This is among the earlier attempts to identify firm-specific factors that incentivize firms to prefer one form of shifting over another. Second, the study jointly examines both forms of shifting by taking a uniform sample of firms over the same period. Most of the prior studies have examined one form at a time.

Analisis Pengaruh Dana Syirkah Temporer dan Efisiensi Operasi Terhadap Profitabilitas Bank Syariah

The purpose of this research is to examine the effect of Temporary Syirkah Fund and Operational Efficiency on Sharia Bank Profitability. Indicator of Syirkah Temporary Fund under study is the amount of public savings funds in Sharia Bank with Mudharabah contract. Operating Efficiency uses the ratio indicator of Operating Expense on Operating Revenue (BOPO). Then, Sharia Bank Profitability is the calculation of Return On Asset Ratio (ROA). The research is conducted by quantitative methods using secondary data. The secondary data comes from quarterly reports from Sharia Bank in Indonesia. The population of this research is Sharia Bank in Indonesia, and then the sample is taken based on purposive sampling with the criteria of five Sharia Bank with the largest assets, to obtain the sample as much as 60 quarterly report of Sharia Bank. This study used regression analysis with significant test of simultaneous parameter (F - test) and significant test of individual parameter (t - test). The result of the hypothesis test indicates that simultaneously and partially Temporary Syirkah Fund and Operational Efficiency affect to Sharia Bank Profitability in Indonesia, calculated by ROA Ratio, and Operating Efficiency have bigger influence to Sharia Bank Profitability compared to Temporary Syirkah Fund.

Accrual-Based Earnings Management: A Case Study in V4 Focusing on Mining And Quarrying Sector

The aim of the contribution is earnings management detection by using a model with the highest explanatory power, as well as verifying hypotheses about the existence of a statistically significant relationship between earnings management and country, as well as firm size within companies operating in the mining and quarrying sector in 2019 and 2018. Data were obtained from the Amadeus database. The sample contains 348 financial reports of companies from 2019 to 2017. Research is focused on V4 companies that have the sum of total assets higher than 2,000,000 EUR, as well as the sum of operating revenue is higher than 100,000 EUR. Three recommended models were used, namely the modified Jones model, Industry model, and Kothari model. The explanatory power of these models was tested by using several criteria. Based on the results, the modified Jones model was chosen for earnings management detection. According to the results, companies in the mining and quarrying sector in V4 use earnings management techniques to manage the profit. It is not possible to clearly determine in which direction they manage their profit more often. Different values were measured in the two observed periods. Based on the results, Czech and Slovak companies used earnings management techniques to increase their profit. On the other hand, Poland and Hungarian companies used earnings management techniques to decrease it. Very large as well as large companies used earnings management techniques to decrease their profit; medium-sized companies used earnings management techniques to increase it.

Operating Subsidies in Urban Public Transit in Latin America: A Quick View

Operating subsidies to urban transit systems are ubiquitous in Latin America, and most systems lack transparency about them. In 2019, the level of subsidization ranged from 26 percent of transit systems total operating revenue to 69 percent. Although demand-size subsidies are better at targeting beneficiaries, most subsidies in the region are supply-side subsidies (subsidies provided to transit system operators). Both demand-side and supply-side subsidies may be needed to ensure that services are affordable, including to middle-income users. The restructuring of public transit subsidies provides an opportunity to improve the efficiency of transit systems and ensure that subsidies benefit those who need them most.

Methodologies and Techniques for Determining the Value of an Aircraft

Aircraft valuation and the estimation of an accurate aircraft price is undoubtedly a challenging task that has significant consequences for airlines. This paper presents an asset valuation model to show how a series of endogenous as well as exogenous factors can influence the value of an aircraft. Specifically, a discounted cash flow methodology is used to forecast the valuation of an old or new generation aircraft. Both total operating revenue and aircraft operating costs are taken into account to devise a reliable pre-tax profit measurement that is used as the basis of the discounted cash flow analysis. A sensitivity analysis based on Monte Carlo simulation is utilized to identify which factors have a more significant influence on the suggested aircraft value. Therefore, it addresses how value fluctuates in response to economic fluctuations. Indeed, the calculated value of an aircraft highly depends on the underlying assumptions used. The calculated value is compared with available data in a case study for verification.

On Global Corporate Control: Review of an Article

This article reviews “The network of global corporate control” by Vitali et al. (2011) where the authors use modern network theory to analyze the centralization of global corporate control. Specifically, they calculate how a central core of transnational corporations (TNCs) have control over the total operating revenue of all transnational corporations. They find that out of 43,060 transnational corporations, 737 top shareholders control about 80 percent of the value of all TNCs. This control is centralized in the financial sector and extends to other sectors of the economy, including manufacturing and services. TNCs are more global than ever before. They are in virtually every country of the world and comprise a world capitalist system.

Coordinated Energy Management for Micro Energy Systems Considering Carbon Emissions Using Multi-Objective Optimization

To promote the utilization of distributed resources, this paper proposes a concept of a micro energy system (MES) and its core structure with energy production, conversion, and storage devices. In addition, the effect of demand–response on the operation of a MES is studied. Firstly, based on uncertainties of a MES, a probability distribution model is introduced. Secondly, with the objectives of maximizing operating revenue, and minimizing operational risk and carbon emissions, a multi-objective coordinated dispatching optimization model was constructed. To solve this model, this paper linearizes objective functions and constraints via fuzzy satisfaction theory, then establishes the input–output matrix of the model and calculates the optimal weight coefficients of different objective functions via the rough set method. Next, a comprehensive dispatching optimization model was built. Finally, data from a MES in Longgang commercial park, Shenzhen City, were introduced for a case study, and the results show that: (1) A MES can integrate different types of energy, such as wind, photovoltaics, and gas. A multi-energy cycle is achieved via energy conversion and storage devices, and different energy demands are satisfied. Demand–response from users in a MES achieves the optimization of source–load interaction. (2) The proposed model gives consideration to the multi-objectives of operating revenue, operational risk, and carbon emissions, and its optimal strategy is obtained by using the proposed solution algorithm. (3) Sensitivity analysis results showed that risks can be avoided, to varying degrees, via reasonable setting of confidence. Price-based demand–response and maximum total emission allowances can be used as indirect factors to influence the energy supply structure of a MES. In summary, the proposed model and solution algorithm are effective tools for different decision makers to conceive of dispatching strategies for different interests.