Earnings Management In European Private Firms Versus Public Firms
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Earnings Management In European Private Firms Versus Public Firms
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Author : Jingwen Yang
language : en
Publisher:
Release Date : 2018
Earnings Management In European Private Firms Versus Public Firms written by Jingwen Yang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with Business categories.
This thesis presents three papers which empirically investigate earnings management (EM) in European private and public firms. Highlighting the importance of private firms, according to the Federation of European Accountants (2016), there are 99% of firms which are registered as private firms, and are considered as the backbone of the European economy. Similarly, there are around 29 million private firms in the U.S., which account for 86% of U.S. firms and generate almost one-half of the nation's GDP. To date there is limited evidence about private firms' EM activities. The thesis attempts to fill this gap by not only analysing EM in private firms, but also by comparing the EM of private firms with that of public firms, and in so doing, assesses whether determinants of EM are similar for both types of firms. The sample used in this study comprises both private and public firms domiciled in 11 European countries for which consolidated financial statements are available for the period from 2001 to 2013. These countries are Belgium, Finland, France, Germany, Greece, Italy, The Netherlands, Portugal, Spain, Sweden, and the U.K. In developing the testable hypotheses, the study employs several theoretical frameworks related to EM including the 'opportunistic behaviour' and 'demand' theories.The main aim of the first paper is to assess the extent of EM for private and public firms domiciled in Europe. In particular, this paper examines the degree of EM for both private and public firms by considering, in part, the influence of country-level factors including legal enforcement, investor protection and tax systems, as well as the adoption of IFRS. The empirical results show that private firms are more likely to engage in EM than public firms, and the effects of IFRS in lowering EM is more pronounced for public firms than for private firms. Furthermore, country-level factors including legal enforcement, investor protection rules and tax rates are important determinants of EM. Given that enhancing country-level legal enforcement systems and investor protection may reduce the use of EM further in both private and public firms, the current study suggests that standard-setters should consider some of the country-level variables to better guarantee the quality of accounting information across countries. The second paper examines the accrual based EM of private and public firms domiciled in Europe, and questions whether IFRS adoption has improved EM. The paper further examines whether EM between private and public firms differs in the following three scenarios (i) due to the need to meet earnings benchmarks, (ii) when obtaining external financing and (iii) whenVIthe firm employs a Big4 auditor. The results suggest public firms, in general, have lower EM and report more conservatively than private firms. This result is consistent with the argument that on average public firms need to provide higher quality financial information to investors and other stakeholders relative to private firms. However, the finding suggest public firms' lower EM is mitigated or decreased in the three settings mentioned above. Finally, this paper observes that the EM of public firms has decreased post-IFRS adoption, supporting the view that IFRS has improved the financial reporting quality of public firms. The third paper assesses the degree of real earnings management (REM) for private and public firms domiciled in Europe. This paper further examines some settings that present clear incentives to manage earnings such as (i) to meet earnings benchmarks, (ii) when obtaining external financing, (iii) when leverage is high, and (iv) when losses are large. The empirical results show that public firms engage in more earnings management through real operating activities, and that REM in public firms increased following IFRS adoption, relative to private firms. Furthermore, this study finds that public firms, overall, face stronger incentives to manage earnings than do private firms' managers in the four settings mentioned above. The study contributes not only to the EM literature on non-accrual earnings management, but also the current debate on IFRS adoptions.
Earnings Management In European Private Firms Versus Public Firms
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Author :
language : en
Publisher:
Release Date : 2018
Earnings Management In European Private Firms Versus Public Firms written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
The Importance Of Reporting Incentives
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Author : David Burgstahler
language : en
Publisher:
Release Date : 2011
The Importance Of Reporting Incentives written by David Burgstahler and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
This paper examines how capital market pressures and institutional factors shape firms' incentives to report earnings that reflect economic performance. To isolate the effects of reporting incentives, we exploit the fact that, within the European Union, privately held corporations face the same accounting standards as publicly traded companies because accounting regulation is based on legal form. We focus on the level of earnings management as one dimension of accounting quality that is particularly responsive to firms' reporting incentives. We document that private firms exhibit higher levels of earnings management and that strong legal systems are associated with less earnings management in private and public firms. We also provide evidence that private and public firms respond differentially to institutional factors, such as book-tax alignment, outside investor protection and capital market structure. Moreover, legal institutions and capital market forces often appear to reinforce each other.
Earnings Management And Local Vs International Accounting Standards Of European Public Firms
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Author : Wolfgang Aussenegg
language : en
Publisher:
Release Date : 2009
Earnings Management And Local Vs International Accounting Standards Of European Public Firms written by Wolfgang Aussenegg and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
We examine how the transition from local GAAPs to IAS/IFRS of companies that are publicly traded on a European stock exchange affects earnings management. To measure earnings management we apply 15 different proxies. In analyzing 17 European countries and more than 18,000 firm-year observations we observe that companies applying IAS/IFRS experience less earnings management than firms applying domestic standards. However, while this is true for Central European countries, UK and Ireland (English legal origin) as well as Northern European Countries (Scandinavian legal origin) show a different behavior. They already have lower earnings management levels prior to IAS/IFRS adoption compared to the rest of Europe. For these countries the transition from local GAAPs to IAS/IFRS does not change their earnings management behavior. Apart from this, we show that firm size and time have no significant effect on earnings management and that growth firms exhibit higher levels of earnings management. In comparing the results for all 15 earnings management measures we conclude that different measures seem to capture different dimensions of earnings management.
Comparative Research On Earnings Management Corporate Governance And Economic Value
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Author : Vieira, Elisabete S.
language : en
Publisher: IGI Global
Release Date : 2021-02-12
Comparative Research On Earnings Management Corporate Governance And Economic Value written by Vieira, Elisabete S. and has been published by IGI Global this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-02-12 with Business & Economics categories.
New trends are emerging regarding earnings management and corporate governance showing similarities and striking differences in the practices of different countries and economies. These new trends currently shape the field of modern corporate governance with crucial issues being looked at in governance law and practices, accounting systems, earnings quality and management, stakeholder involvement, and more. In order to advance these new avenues in corporate governance, research looks at accounting policies firms use in different opportunistic circumstances in order to manage earnings, the corporate governance practices in different countries, firm performance, and other dimensions of companies. The understanding of these topics is beneficial in understanding the current state of different types of firms and their practices in modern times. Comparative Research on Earnings Management, Corporate Governance, and Economic Value is focused on the investigation of key challenges and perspectives of corporate governance and earnings management and outlines possible scenarios of its development. The chapters explore this new avenue of research and cover theoretical, empirical, and experimental studies related to different themes in the global context of earnings management and corporate governance. This book is ideal for economists, businesses, managers, accountants, practitioners, stakeholders, researchers, academicians, and students who are interested in the current issues and advancements in corporate governance and earnings management.
Real Earnings Management In Uk Private And Public Firms
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Author : Jesper Haga
language : en
Publisher:
Release Date : 2018
Real Earnings Management In Uk Private And Public Firms written by Jesper Haga and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
This study analyzes real earnings management among privately held versus publicly listed firms. Our first finding is that public firms engage in more earnings management through operating activities. When a clear incentive to manage earnings in a specific direction is present we continue to find that public firms manage their earnings more than private firms. We reason that capital market pressure and ownership characteristics drive our results. Additional analyses reveal that public firms employ more real earnings management as a proportion of the total earnings management strategy. Furthermore, we find that mitigating factors of real earnings management have stronger impact in public firms. This study contributes to literature on non-accrual earnings management and to the broader understanding about the private vis-à-vis public firm reporting and operating behavior. Finally, we contribute by identifying an important societal cost of stock market listing, which is the increase in potentially value-destroying real earnings management.
Earnings Accruals And Real Activities Management Around Initial Public Offerings
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Author : Peter Ising
language : en
Publisher: Springer Science & Business Media
Release Date : 2013-10-06
Earnings Accruals And Real Activities Management Around Initial Public Offerings written by Peter Ising and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-10-06 with Business & Economics categories.
The beginning of the new millennium was characterized by company scandals in accounting around the world. A transparent and fair presentation of financial statements is beneficial for capital market participants. Especially around initial public offerings different incentives of these players exist to influence financial statements in diverse aspects. Therefore, studies of earnings management try to identify abnormal behavior. Peter Ising covers additional aspects to shed light on substantial drivers of discretionary reporting behavior around going public. Factors like influence on real activities, industry affiliation, and specific years in the IPO process add further insight to this theoretical and practical topic. The dependence on these factors is high and confirms that company specifics are important for interpretation of financial results.
Earnings Management In Private Firms
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Author : Morten Nicklas Bigler Jensen
language : en
Publisher:
Release Date : 2019
Earnings Management In Private Firms written by Morten Nicklas Bigler Jensen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
Introduction To Earnings Management
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Author : Malek El Diri
language : en
Publisher: Springer
Release Date : 2017-08-20
Introduction To Earnings Management written by Malek El Diri and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-08-20 with Business & Economics categories.
This book provides researchers and scholars with a comprehensive and up-to-date analysis of earnings management theory and literature. While it raises new questions for future research, the book can be also helpful to other parties who rely on financial reporting in making decisions like regulators, policy makers, shareholders, investors, and gatekeepers e.g., auditors and analysts. The book summarizes the existing literature and provides insight into new areas of research such as the differences between earnings management, fraud, earnings quality, impression management, and expectation management; the trade-off between earnings management activities; the special measures of earnings management; and the classification of earnings management motives based on a comprehensive theoretical framework.
Earnings Management And Contests For Control
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Author : Mauricio Jara
language : en
Publisher:
Release Date : 2012
Earnings Management And Contests For Control written by Mauricio Jara and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
In this paper, the influence of large shareholders on earnings management in family-owned firms is analyzed using a sample of firms from nine European countries. How contests for control for the largest shareholder and the existence of a controlling coalition in family-owned firms affect earnings management is considered. It was found that increases in the contestability of control by the largest shareholder reduce earnings management in family-owned firms. The results also show that in firms in which the largest shareholder is a family member, a second or third family shareholder increases discretionary accruals.