Earnings Management, Uncertainty and the Role of Conservative Financial Reporting: Empirical Evidence from Pakistan

• 발행기관: 한국유통과학회
• 저자명: Huma FATIMA Abdul HAQUE Muhammad Ali Jibran QAMMAR
• 간행물 정보: 『The Journal of Asian Finance, Economics and Business(JAFEB)』The Journal of Asian Finance, Economics, and Business Vol. 9 No.4, 39~52쪽, 전체 14쪽
• 주제분류: 경제경영 > 경제학
• 파일형태: PDF
• 발행일자: 2022.04.30

영문 초록

This study examines whether accounting conservatism can support real earnings management by reducing accrual earnings management techniques. The net impact of conservative reporting on earnings management is also analyzed. It is assumed that moderating the role of conservative financial reporting during uncertainty can mitigate earnings management practices. For our analysis, 5354 firm-year observations for the period 2007-2020 of nonfinancial companies listed on the Pakistan Stock Exchange are applied. To measure conservatism in the non-financial sector of Pakistan, Khan and Watts’ (2009) model is used to provide evidence that conservatism is a way to restrict earnings management during uncertainty. “Prospector” and “Defender” Business strategy is applied for measuring firm-level uncertainty. To measure accrual earnings management Modified Jones (1995) model and Dechow and Dichev (2002) approach and Kasznik (1999) model are applied, and for real earnings management Roychowdhury model is applied which follows three approaches to measure real earnings management i.e. cash flow manipulation, Overproduction, and discretionary expenses. The estimations support our hypothesis by providing statistically significant proof that conservative financial reporting in a developing economy like Pakistan may be used to overcome the net impact of earnings management during uncertainty. Our results provide critical and practical implications for investors, researchers, and standard setters.

목차

1. Introduction

2. Literature Review

3. Data and Methodology

4. Empirical Results and Discussion

5. Conclusion

References

키워드

Earnings Management Accounting Conservatism Uncertainty