...Empirical research on the impact of fair value measurements on earnings management analysis Contents Abstract 1. Introduction 2. Background and hypothesis 3. Literature review 4、Methodology 5. Sample selection and description 6. The test on the earnings management universality 7. The Impact of the Fair Value Application on Earnings Management 7.1 Correlation Analysis of the Main Variables 7.2 The Empirical Test of Linear Regression Equation 8. Limitation 9. Summary References Appendix I . Appendix II . Abstract The impact of fair value standard application towards enterprise is far-reaching and important, mainly in measurement methods of the changes on assets and liabilities way. This shift of fair value measurement method helps business executives for some sort of motive or target to conduct earnings management, thereby artificially adjusted profits. The authors focus on the study of earnings management in the listed Corporation under the fair value model during the financial crisis. We investigate the correlation between the application of fair value accounting and earnings management for providing the policy basis to improve fair value accounting and standardizing corporate earnings management behavior. We collect the sample data by selecting the Chinese A-share listed companies, and use the modified Jones model as a tool to prove the listed companies in the existence of widespread earnings management behavior. Descriptive analysis and...
Words: 6467 - Pages: 26
...Equity Incentive of the Listed Corporations in the SME Board of China —An Empirical Analysis Based on the View of Earnings Management Lixin Xu, Wenqin Cui School of Management, University of Science and Technology of China, Hefei, China Email: cuiwenqin27@163.com Received October 29, 2013; revised November 29, 2013; accepted December 6, 2013 Copyright © 2014 Lixin Xu, Wenqin Cui. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. In accordance of the Creative Commons Attribution License all Copyrights © 2014 are reserved for SCIRP and the owner of the intellectual property Lixin Xu, Wenqin Cui. All Copyright © 2014 are guarded by law and by SCIRP as a guardian. ABSTRACT Currently, most researches are focusing on Shanghai & Shenzhen exchange, and few researches have been done on the SME board. Besides, while studying the effect of equity incentive, most of the researchers have ignored the earnings management triggered by stock ownership incentive. This paper takes the SME board companies which have implemented stock ownership incentive as the research object. We have used earnings management to modify the company performance and carried out an empirical research to study the effect of stock ownership incentive. Our result shows that without earnings management to modify the company performance, stock ownership...
Words: 4985 - Pages: 20
...20FBNKRN1114 RESEARCH METHODOLOGY IMPACT OF DIVIDEND POLICY ON SHARE PRICE: A CROSS SECTIONAL STUDY OF COMMERCIAL BANK LISTED IN NIGERIAN STOCK EXCHANGE SUBMITTED TO PROF. NIRMALYA B BISWAS ABSTRACT Dividend decision is a vital financial decision any company must make a side from financing decision and investment decision. Ordinary shareholders who are the owners of the company by contributing the capital to run the business are entitled to get returns from the profit made by the company after all obligations or other interest had been met; the policy adopted by the company on how dividend should be paid, how much should be paid and the proportion of profit to be retained is known as dividend policy. Company’s major goal is wealth maximization of shareholders and this can be achieved either by paying returns which is called dividend or through share appreciation by reinvesting the retained profit in to profitable investment. Though a lot of research has been carried out on how dividend policy affect shareholders wealth less has been done on the impact of dividend policy adopted by the Commercial Banks in Nigeria on share price (Market price per shares) of the ordinary shareholders who invested in Banks shares. The aim and purpose of this research is to find out how dividend policy has impacted the MPS (Market price per shares) of an ordinary shareholder in Commercial Banks. This current study will carry out a cross sectional study on the 15 Commercial Banks listed in the...
Words: 5412 - Pages: 22
...Journal of Business and Management ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol.7, No.28, 2015 www.iiste.org Impact of Firm Size on Earnings Management; A Study of Textile Sector of Pakistan Usman Ali MS Business Administration National University of Modern Languages (NUML) Islamabad, Faisalabad Campus Muhammad Afzal Noor Lecturer Department of Management Sciences National University of Modern Languages (NUML) Faisalabad Campus Muhammad Kashif Khurshid Lecturer Department of Management Sciences National University of Modern Languages (NUML) Faisalabad Campus Akhtar Mahmood MS Business Administration National University of Modern Languages (NUML) Islamabad, Faisalabad Campus Abstract The study was conducted to evaluate the impact of firm size on earnings management for the textile sector of Pakistan. For this purpose annual ten years data was obtained from 2004 to 2013 for fifty selected firms from the textile sector of Pakistan. Natural logarithm of total assets was used as the proxy of firm size. On the other hand earning management was the dependent variable of this study. Earnings management was measured through discretionary accruals by using modified Jones model. Descriptive statistics, correlation and panel data analysis was used for capturing the impact of firm size on earnings management. The statistical results of this study revealed that there is positive and significant impact of firm size on earnings management. Keywords: Firm Size,...
Words: 7278 - Pages: 30
...School of Management Blekinge Institute of Technology Determinants of Share Price Movements in Bangladesh: Dividends and Retained Earnings Author Shohrab Hussain Khan Supervisor Mr. Anders Hederstierna Thesis for the degree of MSc. in Business Administration Spring, 2009 Thesis Summary Title: Determinants of Share Price Movements in Bangladesh: Dividends and Retained Earnings Author: Shohrab Hussain Khan Supervisor: Anders Hederstierna Department: School of Management, Blekinge Institute of Technology Course: Master’s thesis in Business Administration, 15 credits (ECTS). Background and Problem Discussion: Financial scholars have been conducting studies of dividend policy for several decades; but different researchers have come to different conclusions. Financial economists have come to different conclusion about factors determining dividend policy and effect of dividend policies on common stock price. A general question may arise in the mind of the shareholders that the corporate dividend policy affects the value of their stocks. So, in addition to the theory of dividend policy, it is necessary to discuss the empirical evidence on the dividend payment practices of the corporations and their possible impacts on common stock prices. Empirical testing of dividend policy may focus on whether the determinants carry information in pricing the common stocks and whether the dividends are the only determinants serving as signals in conveying information about the...
Words: 14412 - Pages: 58
...SECTION 1 - INTRODUCTION 1.1 Background to the study Listed companies use financial statements as one of the major medium of communication with their stakeholders. Therefore, stock market regulators and accounting standards setters trying to improve the quality of financial statements in order to increase the transparency level in financial reporting. (Vishnani S., Shah B.K., 2008). Financial reporting by companies is effected via the preparation and publication of financial statements. These financial statements are required to exhibit certain degree of quality in terms of their information contents. Mines & Wahlen (2006) and Belkaoui (2002) opined that accounting information contained in the financial reports should possess certain qualities as relevance, verifiability, understandability, neutrality, timeliness, comparability, and completeness. When the financial reports disclose quality accounting information, according to Benston (2007), the decision of the users (investors, management, government, employees, creditors, analysts) of the reports could as well be qualitative and informed. While there have been a number of studies on this topic in developed countries (Collins, Maydew and Weiss, 1997; Lev and Zarowin, 1999; Francis and Schipper, 1999; Beisland, Hamberg and Navak, 2010), one is not aware of any expansive study that has explored the subject of value relevance of accounting information in Nigeria. It has not been comprehensively researched primarily...
Words: 6981 - Pages: 28
...Case of Chemical and Pharmaceutical Industry of Pakistan Kanwal Iqbal Khan University of Central Punjab, Lahore Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6) Effect Of Dividends On Stock Prices 2 Abstract In Pakistan corporate sector is adversely facing competition due to economic downturn in the world and making efforts to survive in a competitive and uncertain economic environment. This study will help to improve dividend decisions of corporate sector through proper implementation of their dividend policies. This paper is an attempt to explain the effect of dividend announcements on stock prices of chemical and pharmaceutical industry of Pakistan. A sample of twenty five companies listed at KSE-100 Index is taken from the period of 2001to 2010. Results of this study is based on Fixed and Random Effect Model which is applied on Panel data to explain the relationship between dividends and stock prices after controlling the variables like Earnings per Share, Retention Ratio and Return on Equity. Results indicate that Cash Dividend, Retention Ratio and Return on Equity has significant positive relation with stock market prices and significantly explains the variations in the stock prices of chemical and pharmaceutical sector of Pakistan while Earnings per Share and Stock Dividends have negative insignificant relation with stock prices. This paper further shows that Dividend Irrelevance Theory is not applicable in case chemical...
Words: 6183 - Pages: 25
...‘’Earnings management, in exchange listed companies, is not fraud but a case of caveat emptor for investors ‘’ UP708386 ‘’Earnings management, in exchange listed companies, is not fraud but a case of caveat emptor for investors ‘’ UP708386 708386 Corporate governance, Financial Crime, Ethics & Controls for Finance Pathways (U234479) 708386 Corporate governance, Financial Crime, Ethics & Controls for Finance Pathways (U234479) ‘’Earnings management, in exchange listed companies, is not fraud but a case of caveat emptor for investors ‘’ This essay is intended to evaluate different views on a case whether the earnings management in exchange listed companies is consider as a fraud or caveat emptor for investors. One of the first mentions of earnings management has been given by Shipper where she described it as ‘’disclosure management, in the sense of purposeful intervention in the external financial reporting process, with the intent of obtaining some private gain.’’ (Shipper, 1989). In other words the managers are adjusting profits or losses on final accounts to mislead the stakeholders and to encourage them from investing. Earnings management become a problem for investors as it generates fake impression about companies success and misguide them into making wrong investment decisions which often leads to a making a loss. Another problem arises with incorrect financial reporting which is insincere for investors and resulting in making a capital market...
Words: 1754 - Pages: 8
...Books: The Case of Malaysian Listed Companies Fathilatul Zakimi Abdul Hamid Rohami Shafie Zaleha Othman Wan Nordin Wan Hussin Faudziah Hanim Fadzil School of Accountancy Universiti Utara Malaysia Sintok, 06010 Kedah Malaysia. Abstract Cooking the books refers to fraudulent accounting activities undertaken by a business to falsify its financial statements. Thus, the objectives of this study are to investigate what the cooking-the-books activities carried out by businesses consist of, how they conduct them, and what the impact is on the business and its shareholders. The case study sample companies are two Malaysian companies that had received various awards from reputable third-party organizations. On the other hand, the activities undertaken in both companies have caused them to be labelled as Malaysian mini Enrons. We employ a qualitative research methodology as most prior research employs a quantitative methodology to investigate the determinant factors in businesses’ cooking-the-book activities. The result of the study shows that the managers have used their positions, prior experience, and regulatory loopholes in their activities. Furthermore, the financial report restatement and higher reported earnings are the early warning signals of their activities. As a result of this, the Malaysian Securities Commission has revised the corporate governance code, and among others incorporated the Audit Oversight Board, known in the US as the Public Company Accounting Oversight Board...
Words: 5312 - Pages: 22
...200400 COMPANY ACCOUNTING AUTUMN 2014 GROUP ASSIGNMENT One of the assessment items for this unit is a group report. Please refer to your Unit Learning Guide for further information in regard to submission and the marking criteria. Below is a choice of topics for the group report. Your report should be based on ONE of these topics. Choice 1 Topic: Accounting for intragroup transactions. During a financial year it is common for companies within the economic entity (group) to transact with each other. The following is an extract from Note 32 of the BHP Billiton Annual Report 2013. Transactions between each parent company and its subsidiaries … are eliminated on consolidation and are not disclosed in this note. Terms and conditions Sales to and purchases from related parties of goods and services are made in arm’s length transactions at normal market prices and on normal commercial terms. Outstanding balances at year-end are unsecured and settlement occurs in cash. Other amounts owing from related parties represent secured loans made to jointly controlled entities under co-funding arrangements. Such loans are made on an arm’s length basis with interest charged at market rates and are due to be repaid between 30th September 2013 and 31 August 2031. No guarantees are provided or received for any related party receivables or payables. No provision for doubtful debts has been recognised in relation to any outstanding balances and no expense has been recognised in respect of bad...
Words: 841 - Pages: 4
...University of Geneva ABSTRACT The relationship between accounting information and capital markets has been the subject of numerous studies, especially in the US. The purpose of this article is to examine the corresponding evidence in Europe. This review classi es the European literature into three groups: studies of the market reaction to newly released accounting information; studies of the long-term association between stock returns and accounting numbers; studies devoted to the use of accounting data by investors and to the impact of market pressure on accounting choices. The paper reviews and summarizes the main results related to each of these topics. It also addresses some methodological issues and provides suggestions for future research. 1. INTRODUCTION Since the pioneering work of Ball and Brown (1968), the relationship between accounting information and capital markets has attracted considerable attention, to the point that it is probably one of the most popular issues in the accounting literature. The interest for this subject is legitimate, given the generally accepted statement that accounting gures are aimed at providing investors with relevant information for their investment decisions. Even if accounting data are used in various contexts such as the contracting process within the rm or between the rm and its creditors and suppliers, regarding capital markets they are supposed to facilitate the prediction of rms’ future cash ows and help investors assess future...
Words: 15961 - Pages: 64
...International Business Research April, 2008 Post-IPO Operating Performance and Earnings Management Nurwati A. Ahmad-Zaluki Banking and Finance Building, College of Business Universiti Utara Malaysia, 06010 Sintok Kedah, Malaysia Tel: 60-4-928-6451 Abstract E-mail: nurwati@uum.edu.my The present study investigates the operating performance and the existence of earnings management for a sample of 254 Malaysian IPO companies over the period 1990-2000. Using accrual-based measure of operating performance, this study finds strong evidence of declining performance in the IPO year and up to three years following IPOs relative to the pre-IPO period. This finding is consistent with the results of prior studies documenting the long run underperformance of IPO companies. The results also confirm that the decline in post-IPO operating performance is due to the existence of earnings manipulation by the IPO manager at the time of going public. Keywords: Initial public offerings, Operating performance, Earnings management 1. Introduction Existing international studies of initial public offering (IPO) companies find that operating performance had declined in the post-IPO period (Jain and Kini, 1994; Mikkelson et al, 1997; Kim et al., 2004). The majority of prior studies are based on the accrual measure of accounting profits which are potentially subject to accounting manipulation by managers, for example through working capital adjustments (Teoh et al., 1998). The most recent...
Words: 7044 - Pages: 29
...What is the effect of mandatory IFRS adoption on earning management ABSTRACT: International Accounting Standard play a important role in the world. More and more countries trend to adopt international accounting standard. Beginning in 2005, public companies in the member states of the European Union (EU) are required to apply IFRS. Ten years have passed, what is the effect of mandatory IFRS adoption on these countries, and how IFRS affect on earning management. In the paper, I will discuss this question based on some previous finding. Next, I will use IFRS 9 as a specific case for my conclusion. Finally, I will give my opinion on the effect of mandatory IFRS adoption on earning management. Key Words: Accounting Standard, earning management, IFRS, Financial Instrument, bank, impairment of asset, IAS39, IFRS 9 I. The effect of mandatory IFRS adoption on earning management 1.1 In 2012, Yi Lin Chua, Chee Seng Cheong. And Graeme Gould publish a article named “The Impact of Mandatory IFRS Adoption on Accounting Quality: Evidence form Australis. This article examines the impact of IFRS on accounting quality by focusing on threes perspectives: (1) earning management, (2) timely loss recognition, and (3) value relevance. In my paper, I will focus on earning management. First, the author talk about the reason he choose Australia. Because Australia is one of the first countries located outside of the EU that has mandated IFRS and is also the first non-EU adopting...
Words: 2776 - Pages: 12
...Highlights of IFRS Research By CYNTHIA BOLT-LEE, CPA and L. MURPHY SMITH, CPA, DBA NOVEMBER 2009 Conversion from U.S. GAAP to IFRS is a heavily discussed topic in the corporate world. Expected benefits of adoption include reporting consistency, enhanced global competition and improved financial reporting transparency. While many countries worldwide have already adopted IFRS, many other countries are closely examining its effects before adoption, not only from an economic perspective but also from a reporting quality position. COMPARING RESULTS Researchers Elaine Henry, Stephen Lin and Ya-Wen Yang evaluated the difference between financial results under U.S. GAAP compared to IFRS. Their results show that convergence between U.S. GAAP and IFRS is occurring. Using 2004 to 2006 reconciliation disclosures, the authors found that the calculated difference between shareholders’ equity under U.S. GAAP and under IFRS declined from 2004 to 2006. In addition, the difference between U.S. GAAP and IFRS reported net income during this period also declined but remained significantly different. Pensions and goodwill appeared to be the dominant reconciliation items. Reconciliation amounts varied by industry and country, raising questions about consistency between region and industry. Additionally, more than 70% of the companies examined in 2004 through 2006 had a higher return on equity under IFRS compared to U.S. GAAP. The 2007 SEC elimination of the IFRS-to-U.S. GAAP reconciliation...
Words: 2908 - Pages: 12
...policy that have been discussed and argued by many researchers over the years. It is aim to helping firms’ management to set their dividend policy and provide additional knowledge to investors. The theoretical aspect is agency theory which has negative relationship between percentages of insiders and ratio of dividend payout. The signaling theory is applicable in the real world but there is no evidence to support changes in dividend payout signaling the current and future performance of the firm. Bird-in-the-hand theory which risk adverse investors prefer receive dividend now instead of sell their shares in future for capital gain and this theory was not agreed by MM. Next is tax preference theory to study whether the level of firm leverage ratio will affect the dividend payout but it is not applicable for Indian firms. Lastly will discuss about how firm size and financial leverage can affect the firms’ dividend payout. In conclusion, since firms are free to choose whether to distribute dividend or retained their earnings, so there are not right or wrong theories and factors for dividend policy. Government regulations on firms and corporate governance implement by the firms make the difficulties for researchers to conclude a standard dividend policy can implement by different firms across different country. 1.0 Introduction Dividend policy is a policy follows by management to decide size and pattern of dividend they should pay and in what circumstances they should declare dividend...
Words: 4626 - Pages: 19
