Indian Journal of Finance

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The State of Earnings Management in India : An Empirical Analysis


Affiliations
1 Research Scholar, Indian Institute of Technology Roorkee, Roorkee - 247 001, Uttarakhand, India
2 Student, Indian Institute of Technology Roorkee, Roorkee - 247 001, Uttarakhand, India
3 Assistant Professor, Indian Institute of Technology Roorkee, Roorkee - 247001, Uttarakhand, India

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Earnings management has become an area of concern after the fall of giant enterprises. The fall of Xerox, Worldcom, Satyam, and Enron posed a threat to investors' confidence. Undoubtedly, countries like India, which are quickly developing, have to be more precise with their corporate governance practices. The Securities and Exchange Board of India (SEBI) mentioned that in India, the average earnings management is 2.9%. In an attempt to estimate the level of earnings management, the study analyzed the earnings management levels across various sectors of the economy. The study attempted to understand the state of earnings management in India for a period of four years (2010-2013) across seven sectors of India. These seven sectors included : (a) hotels, (b) forging, (c) chemical and fertilizers, (d) healthcare, (e) fast moving consumer goods (FMCGs), (f) non-electrical, (g) consumer durables. The study considered a total of 1027 companies for analysis. The study also checked the predictability of the modified Jones model in detecting earnings management for each sector under consideration in this study.

Keywords

Earnings Management, Modified Jones Model, Discretionary Accruals, Indian Context

M410, M420, M490

Paper Submission Date : July 8, 2015 ; Paper sent back for Revision : October 8, 2015 ; Paper Acceptance Date : November 20, 2015.

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  • The State of Earnings Management in India : An Empirical Analysis

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Authors

Raghuveer Kaur
Research Scholar, Indian Institute of Technology Roorkee, Roorkee - 247 001, Uttarakhand, India
Sanachit Mehra
Student, Indian Institute of Technology Roorkee, Roorkee - 247 001, Uttarakhand, India
Ashu Khanna
Assistant Professor, Indian Institute of Technology Roorkee, Roorkee - 247001, Uttarakhand, India

Abstract


Earnings management has become an area of concern after the fall of giant enterprises. The fall of Xerox, Worldcom, Satyam, and Enron posed a threat to investors' confidence. Undoubtedly, countries like India, which are quickly developing, have to be more precise with their corporate governance practices. The Securities and Exchange Board of India (SEBI) mentioned that in India, the average earnings management is 2.9%. In an attempt to estimate the level of earnings management, the study analyzed the earnings management levels across various sectors of the economy. The study attempted to understand the state of earnings management in India for a period of four years (2010-2013) across seven sectors of India. These seven sectors included : (a) hotels, (b) forging, (c) chemical and fertilizers, (d) healthcare, (e) fast moving consumer goods (FMCGs), (f) non-electrical, (g) consumer durables. The study considered a total of 1027 companies for analysis. The study also checked the predictability of the modified Jones model in detecting earnings management for each sector under consideration in this study.

Keywords


Earnings Management, Modified Jones Model, Discretionary Accruals, Indian Context

M410, M420, M490

Paper Submission Date : July 8, 2015 ; Paper sent back for Revision : October 8, 2015 ; Paper Acceptance Date : November 20, 2015.




DOI: https://doi.org/10.17010/ijf%2F2015%2Fv9i12%2F84383