Asian Journal of Management

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Earnings Management Practices in India:A Study on Selected Public Enterprises


Affiliations
1 Tripura University [A Central University], Suryamaninagar-799022, India
     

   Subscribe/Renew Journal


The present study attempted to explore the impact of discretionary accruals on earnings management practices among the Public Sector Enterprises (PSEs) in Indian. DeAngelo (1986) Model has been used for calculating discretionary accruals in regard to potential earnings management for the study. The sample was drawn from public enterprises in India during the year from 2003-04 to 2012-13. It also explores earnings management issues with respect to industry classification on the basis of service and non-service sectors and witnessed that the service sector industries under study are involve in income decreasing earnings management while non-service sector industries are reverse practice. Furthermore, it is also found that there is negative correlation between size of the firm and Discretionary accruals as proxy to earnings management during the study period.

Keywords

Discretionary Accrual, Earnings Management, Operating Cash Flow, Public Enterprise.
Subscription Login to verify subscription
User
Notifications
Font Size


  • Ahmed, K., Godfrey, J. M., and Saleh, N. M. (2008). Market perceptions of discretionary accruals by debt renegotiating during economic downturn. The International Journal of Accounting, 43, 114-138.

  • Ahorany, J., Lin, C. J., and Loeb, M. (1993). Initial Public Offerings, accounting choices, and earnings management. Contemporary Accounting Research, 10, 61-81.

  • Ayers, B. C., Jiang, J., and Yeung, P. E. (2006). Discretionary accruals and earnings management: An analysis of pseudo earnings targets. The Accounting Review, 81, 617-652.

  • Baber, W. R., Kang, S. H., and Li, Y. (2011). Modeling Discretionary Accrual Reversal and the Balance sheet as an Earnings Management Consultant. The Accounting Review, 86, 1189-1212.

  • Ball, R., Robin, A., and Wu, J. S. (2003). Incentives versus standards: properties of accounting income in four East Asian countries. Journal of Accounting and Economics, 36(1-3), 235– 270.

  • Barth, M., Landsman, W., and Lang, M. (2008). International Accounting Standards and Accounting Quality. Journal of Accounting Research, 46, 467-498.

  • Bissessur, S. (2008). Earnings Quality and Earnings Management. Saarbrücken: VDM Verlag.

  • Burgstahler, D. C., Hail, L., and Leuz, C. (2006). The importance of reporting incentives: Earnings management in European private and public firms. The Accounting Review, 81, 983-1016.

  • Burgstahler, D., and Dichev, I. (1997). Earnings management to avoid earnings decreases and losses. Journal of Accounting and Economics, 24, 99-126.

  • Bushman, R. M., and Piotroski, J. D. (2006). Financial reporting incentives for conservative accounting: the influence of legal and political institutions. Journal of Accounting and Economics, 42(1-2), 107–148.

  • Charitou, A., Lambertides, N., and Trigeorgis, L. (2007). Earnings behaviour of financially distressed firms: The role of institutional ownership. Abacus, 43, 271-296.

  • Chipalkatti, N., and Rishi, M. (2007). Do Indian Banks understate their Bad Loans. The Journal of Developing Areas, 40, 75-91.

  • Cohen, D., Dey, A., and Lys, T. (2008). Real and Accruals-based Earnings Management in the pre and post-Sarbanes Oxley Eras. The Accounting Review, 83, 757-788.

  • DeAngelo:, L. E. (1986). Accounting Numbers as Market Valuation Substitutes: A Study of Management Buyouts of Public Stockholders. The Accounting Review, 61(3), 400-420.

  • Dechow, P. M., Hutton, A. P., Kim, J. H., and Sloan , R. (2012). Detecting Earnings Management: A New Approach. Journal of Accounting Research, 50, 275-334.

  • Dechow, P. M., Sloan, R. G., and Sweeney, A. P. (1995). Detecting Earnings Management. Accounting Review, 70, 193-225.

  • DeFond, M. L., and Jiambalvo, J. (1994). Debt covenant violation and manipulation of accruals. Journal of Accounting and Economics, 17(1-2), 145-176.

  • Erickson, M., and Wang, S. W. (1999). Earnings management by acquiring firms in stock for stock mergers. Journal of Accounting and Economics, 27, 149-176.

  • Fields, D., Lys, Z., and Vincent, L. (2001). Empirical Research on Accounting Choice. Journal of Accounting and Economics, 31, 255-307.

  • Gaver, J. J., Gaver, K. M., and Austin, J. R. (1995). Additional evidence on bonus plan and income management. Journal of Accounting and Economics, 19, 3-28.

  • Goel, S. (2012). Demystifying Earnings Management Through Accruals Management: An Indian Corporate Study. Vikalpa, 37(1), 49-56.

  • Graham, J. R., Harvey, C. R., and Rajgopal, S. (2005). The economic implications of corporate financial reporting. Journal of Accounting and Economics, 40, 3-73.

  • Guay, W. R., Kothari, S. P., and Watts, R. L. (1996). A Market-based Evaluation of Discretionary Accrual Model. Journal of Accounting Research, 34, 83-105.

  • Han, J. C., and Wang, S. W. (1998). Political cost and earnings management of oil companies during the 1990 Persian Gulf Crisis. The Accounting Review, 73(1), 103-177.

  • Healy, P. M., and Wahlen, J. M. (1999). A review of the earnings management literature and its implications for standard setting. Accounting Horizons, 13, 365–383.

  • Hirshleifer, D., Hou, K., and Teoh, S. H. (2009). Accruals, Cash Flow, and Aggregate Stock Returns. Journal of Financial Economics, 91, 389-406.

  • Hong, X. (2001). The Mispricing of Abnormal Accruals. Accounting Review, 76, 357-373.

  • Hribar, P., and Collins, D. W. (2002). Errors in Estimating Accruals: Implications for Empirical Research. Journal of Accounting Research, 40(1), 105-134.

  • Huijgen, C., and Lubberink, M. (2005). Earnings conservatism, litigation and contracting: The case of cross-listed firm. Journal of Business Finance and Accounting, 32, 1275-1309.

  • Islam, A., Ali, R., and Ahmad, Z. (2011). Is Modified Jones Model Effective in Detecting Earnings Management? Evidence from A Developing Economy. International Journal of Economics and Finance, 3(2), 116-125.

  • Jenkins, D. S., Kane, G. D., and Velury, U. (2009). Earnings conservatism and value relevance across the business cycle. Journal of Business Finance and Accounting, 36, 1041- 1058.

  • Kothari, S. P., Leone, A. J., and Wasley, C. E. (2005). Performance Matched Discretionary Accrual Measures. Journal of Accounting and Economics, 39, 163-197.

  • Krishnan, G. V. (2007). Did earnings conservatism increase for former Andersen clients? Journal of Accounting, Auditing and Finance, 22, 141-163.

  • Lang, M., Raedy, J., and Wilson, W. (2006). Earnings management and cross listing: Are reconciled earnings comparable to US earnings? Journal of Accounting and Economics, 42, 255-283.

  • Lee, B. B., and Choi, B. (2002). Company Size, Auditor type and Earnings Management. Journal of Forensic Accounting, 3, 27-50.

  • Lim , S., and Matolcsy, Z. (1999). Earnings management of firms subjected to product price controls. Accounting and Finance, 30, 131-150.

  • Magnan, M., Nadeau, C., and Cormier, D. (1999). Earnings management during antidumping investigations: Analysis and implications. Revue Canadienne des Sciences de l'Administration, 16(2), 149-162.

  • Marra, A., Mazzola, P., and Prencipe, A. (2011). Board Monitoring and Earnings Management Pre and Post IFRS. The International Journal of Accounting, 46, 206-230.

  • Memis, M. U., and Cetenak, E. H. (2012). Earnings Management, Audit Quality and Legal Environment: An International Comparison. International Journal of Economics and Financial Issues, 2(4), 460-469.

  • Navissi, F. (1999). Earnings management under price regulation. Contemporary Accounting Research, 16(2), 281-304.

  • Richardson, V. J. (2000). Information Asymmetry and Earnings Management: Some Evidence. Review of Quantitative Finance and Accounting, 15, 325-347.

  • Roy, C., and Debnath, P. (2015). Earnings Management Practices in Financial Reporting of Public Enterprises in India: An Empirical Test with M-Score. Workin Paper Series at SSRN available available at: http://ssrn.com/abstract=2551713.

  • Rudra, T., and Bhattachararjee, C. A. (2012). Does IFRS influence Earnings Management: Evidence from India. Journal of Management Research, 4, 1-7.

  • Rudra, T., and Bhattacharjee, D. (2012). Does IFRs Influence Earnings Management? Evidence from India. Journal of Management Research, 4(1), 1-13.

  • Saleh, N. M., and Ahmed, K. (2005). Earnings management of distressed firms during debt renegotiation. Accounting and Business Research, 35, 69-86.

  • Sarkar, J., Sarkar, S., and Sen, K. (2008). Board of Directors and Opportunistic Earnings Management: Evidence from India. Journal of Accounting, Auditing and Finance, 23, 517-551.

  • Schipper, K. (1989). Commentary on earnings management. Accounting Horizons, 3, 91–102.

  • Shen, C. H., and Chih, H. L. (2005). Investor Protection, Prospect Theory and Earnings Management: An International Comparison of the Banking Industry. Journal of Banking and Finance, 29, 2675-2697.

  • Sloan, R. (1996). Do Stock Prices fully Reflect Information in Accruals and Cash Flows about Future Earnings? The Accounting Review, 71, 289-316.

  • Sra, J., Ajit, D., and Donker, H. (2013). Business Cycles and Earnings Management. Annual Conference of the Administration Services Association of. Calgary: Canada.

  • Stammerjohan, W. W., and Hall, S. C. (2003). Legal costs and accounting choices: Another test of the litigation hypothesis. Journal of Business Finance and Accounting, 30(5), 829-862.

  • Subramanyam, K. R. (1996). The Pricing of Discretionary Accruals. Journal of Accounting and Economics, 22, 249-281.

  • Sweeney, A. P. (1994). Debt covenant violations and manager's accounting responses. Journal of Accounting and Economics, 17, 281-308.

  • Zhang, A. Y. (2012). Evidence on the Trade-off between Real Activitie Manipulation and Accrual Based Earnings Management. Accounting Review, 87, 675-703.


Abstract Views: 204

PDF Views: 0




  • Earnings Management Practices in India:A Study on Selected Public Enterprises

Abstract Views: 204  |  PDF Views: 0

Authors

Pranesh Debnath
Tripura University [A Central University], Suryamaninagar-799022, India

Abstract


The present study attempted to explore the impact of discretionary accruals on earnings management practices among the Public Sector Enterprises (PSEs) in Indian. DeAngelo (1986) Model has been used for calculating discretionary accruals in regard to potential earnings management for the study. The sample was drawn from public enterprises in India during the year from 2003-04 to 2012-13. It also explores earnings management issues with respect to industry classification on the basis of service and non-service sectors and witnessed that the service sector industries under study are involve in income decreasing earnings management while non-service sector industries are reverse practice. Furthermore, it is also found that there is negative correlation between size of the firm and Discretionary accruals as proxy to earnings management during the study period.

Keywords


Discretionary Accrual, Earnings Management, Operating Cash Flow, Public Enterprise.

References