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Examination of Factors Determining Bad Debt Provisions: Effects of Receivables Management, Conservatism and Earnings Management

Author

Listed:
  • Serdar Benligiray

    (Anadolu University)

  • Ahmet Onay

    (Eskisehir Technical Universi̇ty)

Abstract

This paper aims to identify the characteristics of the provision for bad debts reported in the financial statements of firms listed on Borsa Istanbul. For this purpose, the effects of conservative reporting and earnings management are examined by controlling the effect of receivables management and other financial factors. According to the findings, the receivables policy and the firm’s financial condition are the main determinants of the provisions. The provisions are observed to affect the earnings significantly. However, these accruals can not be argued to be used to achieve earnings targets. The observed effect of total discretionary accruals on residual provisions supports the argument that receivables are used as a tool for earnings management. For the analysis firms, it can be argued that the provisioning and write-off procedures for accounts receivables are ineffective. Findings indicate that conservatism increases the provision for debts.

Suggested Citation

  • Serdar Benligiray & Ahmet Onay, 2023. "Examination of Factors Determining Bad Debt Provisions: Effects of Receivables Management, Conservatism and Earnings Management," Journal of Finance Letters (Maliye ve Finans Yazıları), Maliye ve Finans Yazıları Yayıncılık Ltd. Şti., vol. 38(120), pages 97-130, October.
    • Handle: RePEc:acc:malfin:v:38:y:2023:i:120:p:97-130
    DOI: https://doi.org/10.33203/mfy.1290589
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    More about this item

    Keywords

    Receivables Management; Conservatism; Financial Distress; Earnings Management;
    All these keywords.

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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