Earnings management with the absence of income tax avoidance motivation: evidence from pre-, during, and post- global financial crisis
| Autor: | Osama Atayah, Hazem Marashdeh, Allam Hamdan |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2024 |
| Předmět: | |
| Zdroj: | AJAR (Asian Journal of Accounting Research), Vol 9, Iss 2, Pp 153-168 (2024) |
| Druh dokumentu: | article |
| ISSN: | 2443-4175 2459-9700 |
| DOI: | 10.1108/AJAR-04-2023-0130/full/pdf |
| Popis: | Purpose – This study aims to examines both accrual and real-based earnings management (EM) behavior of listed corporations in tax-free countries during different economic situations. It also addresses the link between firm- and country-level determinants of accrual and real-based EM and explores economic conditions' influence on these determinants. Design/methodology/approach – The study examines 1,608 firm-years, covers sixteen years (2004–2019), clustered into three periods according to the global financial crisis (GFC): four years prior (2004–2007), two years during (2008–2009), and ten years post the GFC (2010–2019). We employ the modified Jones model (performance-matched) developed by Kothari et al. (2005) to measure the accrual-based EM (positive and negative discretionary accrual EM) and the three levels model for Dechow et al. (1998) to measure the real-based EM (cash flow from operating, discretionary expenses and abnormal production cost). Findings – The study finds a significant increase in EM practices in the listed corporations in tax-free countries during the economic downturn. These corporations are found to understate their earnings during the economic stress period. Simultaneously, the firm-level determinants of EM practices were at the same level of significance during different economic conditions in accrual-based EM. In contrast, the country-level EM determinants vary based on the economic conditions. Originality/value – Financial reports' users gain a deep understanding of the quality of financial reports in the context of tax-free country. And, the study outcomes inspire policymakers to develop relevant legislation to mitigate financial reports' risk and adequately protect the financial reports' users. |
| Databáze: | Directory of Open Access Journals |
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