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https://hdl.handle.net/1959.11/23090
Title: | An Exploratory Analysis of Earnings Management Practices in Australia and New Zealand | Contributor(s): | Sun, Lan (author); Farooque, Omar (author) | Publication Date: | 2018 | Open Access: | Yes | DOI: | 10.1108/IJAIM-09-2016-0087 | Handle Link: | https://hdl.handle.net/1959.11/23090 | Abstract: | This study aims to explore corporate earnings management practices in Australia and New Zealand before and after the regulatory changes and corporate governance reforms. The study argues that the effectiveness of regulatory reforms has to be reflected in constraining earnings management in post-reform period as compared to pre-reform period. Design/methodology/approach Using a sample of 3,966 firm-year observations, including all ASX and NZX listed firms for the period 2001-2006, the study examines earnings management practices in both countries in pre-and post-reform periods with appropriate statistical methods. Findings The results indicate some interesting phenomenon: the magnitude of earnings management did not decline after the governance reform as a positive time trend is observed in the entire sample as well as in Australian and New Zealand sub-samples, suggesting that earnings management has been growing over time. Additional test indicates no structural change has occurred before and after the new regulations. The shifting from decreasing earnings management to increasing earnings management can be interpreted as an evidence that earnings become more 'informative' in a more transparent disclosure regime to capture short-run benefits from regulator reforms. Research limitations/implications The shifting of earnings management behaviour from decreasing to increasing income can be interpreted as the outcome of more "informative", rather than "deliberate", earnings management in a more transparent disclosure regime to capture short-run benefits of regulatory reforms, which is worth further investigation. The findings of the study can lead regulatory authorities taking appropriate measures to promote earnings quality in corporate financial reporting from a long-run decision usefulness context. Any future reforms should be directed to protecting the interest of stakeholders as well as ensuring benefits outweighing costs for them. Practical implications The findings of the study can lead regulatory authorities in taking appropriate measures to promote earnings quality in corporate financial reporting from a long-run decision usefulness context. Originality/value The study adds value to the existing earnings management literature as well as effectiveness of regulations for the benefit of wider stakeholder groups. | Publication Type: | Journal Article | Source of Publication: | International Journal of Accounting & Information Management, 26(1), p. 81-114 | Publisher: | Emerald Publishing Limited | Place of Publication: | United Kingdom | ISSN: | 1758-9037 1834-7649 |
Fields of Research (FoR) 2008: | 150103 Financial Accounting 150303 Corporate Governance and Stakeholder Engagement 150101 Accounting Theory and Standards |
Fields of Research (FoR) 2020: | 350103 Financial accounting 350101 Accounting theory and standards 350701 Corporate governance |
Socio-Economic Objective (SEO) 2008: | 910103 Economic Growth 910402 Management 900201 Administration and Business Support Services |
Socio-Economic Objective (SEO) 2020: | 110301 Administration and business support services 150203 Economic growth 150302 Management |
Peer Reviewed: | Yes | HERDC Category Description: | C1 Refereed Article in a Scholarly Journal |
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Appears in Collections: | Journal Article UNE Business School |
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File | Description | Size | Format | |
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open/SOURCE02.pdf | Post-peer review version | 864.59 kB | Adobe PDF Download Adobe | View/Open |
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