IDEAS home Printed from https://ideas.repec.org/a/adx/journl/v4y2022i1p158-164.html
   My bibliography  Save this article

Influence of Advertising Intensity on Real Earnings Management: Evidence from Four Sectors of Pakistan

Author

Listed:
  • Mubashar Tanveer
  • Mohsin Altaf
  • Zahid Ali Akbar
  • Uzma Nisar

Abstract

The current study aimed to investigate the link between advertising intensity and real earnings management (REM) in the context of four sectors of Pakistan. Besides advertising intensity, market to book ratio, leverage, and firm size were included as explanatory variables. On the basis of data availability for the time period 2007-2019, 11 firms were selected from the Auto assembler sector, 6 firms from Auto parts, 16 firms from Food and Personal Care (PC), and eight firms from the Pharmaceutical sector. Data of the Auto assembler sector was analyzed by random effects panel data regression, whereas data of other three sectors was analyzed by fixed-effects model. In respect of Food and PC and Pharmaceutical sectors, the results of the present study indicate that the extent of REM increases with advertising intensity. Firms adopt the REM approach in order to show the positive outcome of large advertising expenditures. Additionally, a significant negative link between MBR and REM was noted for all sectors except Auto parts. Moreover, a significant positive link between leverage and REM was observed for all sectors except Food and PC. Also, a significant positive link between firm size and REM was noted for the Auto parts sector only. The present study is the first in Pakistan to investigate the link of advertising intensity with REM. This study has important implications for investors and regulators. Investors should carefully compare the firms of Food and PC and Pharmaceutical sectors with the other firms of respective sectors. Also, regulators shall make necessary modifications in the regulations to preclude firms from manipulating earnings. The focus of this study was on four sectors of Pakistan. Thus, the link between advertising intensity and REM can be tested for other sectors.

Suggested Citation

  • Mubashar Tanveer & Mohsin Altaf & Zahid Ali Akbar & Uzma Nisar, 2022. "Influence of Advertising Intensity on Real Earnings Management: Evidence from Four Sectors of Pakistan," Journal of Economic Impact, Science Impact Publishers, vol. 4(1), pages 158-164.
    • Handle: RePEc:adx:journl:v:4:y:2022:i:1:p:158-164
    DOI: 10.52223/jei4012219
    as

    Download full text from publisher

    File URL: https://doi.org/10.52223/jei4012219
    Download Restriction: no
    File URL: https://libkey.io/10.52223/jei4012219?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. repec:eme:jaar00:jaar-12-2019-0167 is not listed on IDEAS
    2. Belal Ali Abdulraheem Ghaleb & Hasnah Kamardin & Mosab I. Tabash & Muhammad Shafiullah, 2020. "Family ownership concentration and real earnings management: Empirical evidence from an emerging market," Cogent Economics & Finance, Taylor & Francis Journals, vol. 8(1), pages 1751488-175, January.
    3. repec:eme:mfppss:mf-08-2019-0389 is not listed on IDEAS
    4. Ann-Kristin Achleitner & Nina G�nther & Christoph Kaserer & Gianfranco Siciliano, 2014. "Real Earnings Management and Accrual-based Earnings Management in Family Firms," European Accounting Review, Taylor & Francis Journals, vol. 23(3), pages 431-461, September.
    5. Roychowdhury, Sugata, 2006. "Earnings management through real activities manipulation," Journal of Accounting and Economics, Elsevier, vol. 42(3), pages 335-370, December.
    6. Elena Beccalli & Saverio Bozzolan & Andrea Menini & Philip Molyneux, 2015. "Earnings management, forecast guidance and the banking crisis," The European Journal of Finance, Taylor & Francis Journals, vol. 21(3), pages 242-268, February.
    7. Yosra Mnif & Afef Ben Hamouda, 2020. "Audit quality and the trade-off between real and accrual earnings management in the oil and gas industry: the GCC evidence," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 22(2), pages 223-251, December.
    8. Mohammad Alhadab & Thang Nguyen, 2018. "Corporate diversification and accrual and real earnings management," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 17(2), pages 198-214, May.
    9. Hyungjin Cho & Sera Choi & Dae-Hyun Kwon, 2021. "Employee tenure and earnings management through real activities manipulation," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 28(3), pages 387-410, May.
    10. Seraina C. Anagnostopoulou & Andrianos E. Tsekrekos, 2017. "The effect of financial leverage on real and accrual-based earnings management," Accounting and Business Research, Taylor & Francis Journals, vol. 47(2), pages 191-236, February.
    11. Han Gao & Zhuyi Shen & Yichen Li & Xuxin Mao & Yukun Shi, 2020. "Institutional Investors, Real Earnings Management and Cost of Equity: Evidence from Listed High-tech Firms in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(14), pages 3490-3506, November.
    12. Qunfeng Liao & Bo Ouyang, 2019. "Shareholder litigation risk and real earnings management: a causal inference," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 18(4), pages 557-588, October.
    13. Nguyen Anh Huu & Nguyen Linh Ha & Doan Duong Thuy, 2020. "Ownership Structure and Earnings Management: Empirical Evidence from Vietnam Real Estate Sector," Real Estate Management and Valuation, Sciendo, vol. 28(2), pages 37-51, June.
    14. Xue Li & Zhiru Lin & Jin-hui Luo, 2020. "Does auditor-client distance matter to real earnings management? Evidence from China," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 27(5), pages 531-557, September.
    15. Fei Liu & Jianhua Du & Chao Bian, 2019. "Don’t Touch My Cheese: Short Selling Pressure, Executive Compensation Justification, and Real Activity Earnings Management," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(9), pages 1969-1990, July.
    16. Qunfeng Liao & Bo Ouyang, 2019. "Shareholder litigation risk and real earnings management: a causal inference," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 18(4), pages 557-588, October.
    17. Anshul Mandliya & Vartika Varyani & Yusuf Hassan & Anuja Akhouri & Jatin Pandey, 2020. "What influences intention to purchase sustainable products? impact of advertising and materialism," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 69(8), pages 1647-1669, June.
    18. repec:eme:arjpps:arj-11-2018-0204 is not listed on IDEAS
    19. repec:eme:maj000:maj-12-2019-2521 is not listed on IDEAS
    20. Armaya'u Alhaji Sani & Rohaida Abdul Latif & Redhwan Ahmed Al-Dhamari, 2020. "CEO discretion, political connection and real earnings management in Nigeria," Management Research Review, Emerald Group Publishing Limited, vol. 43(8), pages 909-929, January.
    21. Noorul Azwin binti Md Nasir & Muhammad Jahangir Ali & Rushdi M.R. Razzaque & Kamran Ahmed, 2018. "Real earnings management and financial statement fraud: evidence from Malaysia," International Journal of Accounting & Information Management, Emerald Group Publishing Limited, vol. 26(4), pages 508-526, October.
    22. repec:eme:ijlma0:ijlma-10-2017-0240 is not listed on IDEAS
    23. Mohammad Alhadab & Thang Nguyen, 2018. "Corporate diversification and accrual and real earnings management," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 17(2), pages 198-214, May.
    24. repec:eme:majpps:maj-12-2019-2521 is not listed on IDEAS
    25. Natalie Brown & Yunjae Cheong, 2013. "Measuring the advertising efficiency of the top US sports advertisers," Journal of Global Scholars of Marketing Science, Taylor & Francis Journals, vol. 23(1), pages 23-40, January.
    26. Armaya'u Alhaji Sani & Rohaida Abdul Latif & Redhwan Ahmed Al-Dhamari, 2020. "CEO discretion, political connection and real earnings management in Nigeria," Management Research Review, Emerald Group Publishing Limited, vol. 43(8), pages 909-929, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ahsan Habib & Dinithi Ranasinghe & Julia Yonghua Wu & Pallab Kumar Biswas & Fawad Ahmad, 2022. "Real earnings management: A review of the international literature," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(4), pages 4279-4344, December.
    2. Yang, Jingwen & Hemmings, Danial & Jaafar, Aziz & Jackson, Richard H.G., 2022. "The real earnings management gap between private and public firms: Evidence from Europe," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 49(C).
    3. Aziza Naz & Monika Nadova Kroslakova & Iqra Farheen & Marian Cvirik & Anna Michalkova, 2023. "Nexus between corporate governance and earnings management in family and non-family firms," E&M Economics and Management, Technical University of Liberec, Faculty of Economics, vol. 26(2), pages 42-57, June.
    4. Giovanna Gavana & Pietro Gottardo & Anna Maria Moisello, 2022. "Related Party Transactions and Earnings Management: The Moderating Effect of ESG Performance," Sustainability, MDPI, vol. 14(10), pages 1-21, May.
    5. Ioannis Dokas & Christos Leontidis & Nicolaos Eriotis & Konstantinos Hazakis, 2021. "Earnings Management. An overview of the relative literature," Bulletin of Applied Economics, Risk Market Journals, vol. 8(2), pages 25-55.
    6. Eman Fathi Attia & Messaoud Mehafdi, 2023. "The Dynamic Endogeneity Issue between Corporate Ownership Structure and Real-Based Earnings Manipulation in an Emerging Market: Advanced Dynamic Panel Model," Risks, MDPI, vol. 11(11), pages 1-27, October.
    7. Elmawazini, Khaled & Galariotis, Emilios & Hossain, Ashrafee T. & Rjiba, Hatem, 2024. "Federal judge ideology and real earnings management," International Review of Financial Analysis, Elsevier, vol. 92(C).
    8. Badar Nadeem Ashraf & Ningyu Qian, 2021. "The Impact of Board Internationalization on Real Earnings Management: Evidence From China," SAGE Open, , vol. 11(3), pages 21582440211, July.
    9. Ammar Hussain & Minhas Akbar & Muhammad Kaleem Khan & Ahsan Akbar & Mirela Panait & Marian Catalin Voica, 2020. "When Does Earnings Management Matter? Evidence across the Corporate Life Cycle for Non-Financial Chinese Listed Companies," JRFM, MDPI, vol. 13(12), pages 1-19, December.
    10. Chih-Yang Tseng, 2020. "Family firms and long-term orientation of SG&A expenditures," Review of Quantitative Finance and Accounting, Springer, vol. 55(4), pages 1181-1206, November.
    11. Campa, Domenico & Camacho-Miñano, María-del-Mar, 2015. "The impact of SME’s pre-bankruptcy financial distress on earnings management tools," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 222-234.
    12. Tsung-Kang Chen & Yijie Tseng & Yu-Ting Hsieh, 2015. "Real Earnings Management Uncertainty and Corporate Credit Risk," European Accounting Review, Taylor & Francis Journals, vol. 24(3), pages 413-440, September.
    13. Andrzej Piosik, 2021. "Revenue Identification in Attaining Consensus Estimates on Income Predictions: The Function of Ownership Concentration and Managerial Ownership Confirmation from Poland," Sustainability, MDPI, vol. 13(23), pages 1-16, December.
    14. Zhi Wang & Geert Braam & Daniel Reimsbach & Jiaxin Wang, 2020. "Political embeddedness and firms’ choices of earnings management strategies in China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(5), pages 4723-4755, December.
    15. Eman F. Attia & Wafa Khémiri & Messaoud Mehafdi, 2023. "Does ownership structure reduce earnings manipulation practice of Egyptian listed firms? Evidence from a dynamic panel threshold model," Future Business Journal, Springer, vol. 9(1), pages 1-18, December.
    16. Amin, Qazi Awais & Cumming, Douglas, 2021. "Blockholders and real earnings management-the emerging markets context," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    17. Tzu-Ching Weng & Kai-Jui Hsu & Tzu-Hsuan Kuo, 2023. "Family Succession and Quality of Financial Information: Evidence from China," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 13(3), pages 1-4.
    18. Saoussen Boujelben & Hela Khemakhem-Feki & Ahmad Alqatan, 2020. "Real earnings management and the relevance of operating cash flows: A study of french listed firms," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 17(4), pages 218-229, December.
    19. Martin Glaum, 2020. "Financial Reporting in Non-listed Family Firms: Insights from Interviews with CFOs," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 72(2), pages 225-270, April.
    20. Eng, Li Li & Fang, Hanqing & Tian, Xi & Yu, T. Robert & Zhang, Hongxian, 2019. "Financial crisis and real earnings management in family firms: A comparison between China and the United States," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 59(C), pages 184-201.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:adx:journl:v:4:y:2022:i:1:p:158-164. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Iqbal Javed (email available below). General contact details of provider: https://www.scienceimpactpub.com/journals/index.php .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.