IDEAS home Printed from https://ideas.repec.org/a/eee/mulfin/v19y2009i3p221-236.html
   My bibliography  Save this article

Earnings management to exceed thresholds: Evidence from Singapore and Thailand

Author

Listed:
  • Charoenwong, Charlie
  • Jiraporn, Pornsit

Abstract

Earnings play a vital role in portraying a company's economic health. Hence, executives have incentives to manage earnings. Motivated by Degeorge et al. [Degeorge, F., Patel, J., Zeckhauser, R., 1999. Earnings management to exceed thresholds. Journal of Business 72, 1-33] and Burgstahler and Dichev [Burgstahler, D., Dichev, I., 1997. Earnings management to avoid earnings decreases and losses. Journal of Accounting and Economics 24, 99-126], this study applies the behavioral framework developed by Degeorge et al. [Degeorge, F., Patel, J., Zeckhauser, R., 1999. Earnings management to exceed thresholds. Journal of Business 72, 1-33] to investigate earnings management to exceed thresholds in Singapore and Thailand. The empirical evidence reveals that earnings management exists in Singapore and Thailand to avoid reporting losses and negative earnings growth. This earnings management practice, however, varies between financial and non-financial firms, between Singaporean and Thai firms, and between before and after the Asian financial crisis in 1997. Moreover, corporate governance structure is found to impact the extent of earnings management to exceed thresholds in Singapore.

Suggested Citation

  • Charoenwong, Charlie & Jiraporn, Pornsit, 2009. "Earnings management to exceed thresholds: Evidence from Singapore and Thailand," Journal of Multinational Financial Management, Elsevier, vol. 19(3), pages 221-236, July.
  • Handle: RePEc:eee:mulfin:v:19:y:2009:i:3:p:221-236
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1042-444X(08)00057-1
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. David Burgstahler & Michael Eames, 2006. "Management of Earnings and Analysts' Forecasts to Achieve Zero and Small Positive Earnings Surprises," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(5-6), pages 633-652.
    2. Francis, Jennifer & LaFond, Ryan & Olsson, Per & Schipper, Katherine, 2005. "The market pricing of accruals quality," Journal of Accounting and Economics, Elsevier, vol. 39(2), pages 295-327, June.
    3. Paul Gompers & Joy Ishii & Andrew Metrick, 2003. "Corporate Governance and Equity Prices," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 107-156.
    4. Shen, Chung-Hua & Chih, Hsiang-Lin, 2005. "Investor protection, prospect theory, and earnings management: An international comparison of the banking industry," Journal of Banking & Finance, Elsevier, vol. 29(10), pages 2675-2697, October.
    5. Leuz, Christian & Nanda, Dhananjay & Wysocki, Peter D., 2003. "Earnings management and investor protection: an international comparison," Journal of Financial Economics, Elsevier, vol. 69(3), pages 505-527, September.
    6. David Burgstahler & Michael Eames, 2006. "Management of Earnings and Analysts' Forecasts to Achieve Zero and Small Positive Earnings Surprises," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(5‐6), pages 633-652, June.
    7. Burgstahler, David & Dichev, Ilia, 1997. "Earnings management to avoid earnings decreases and losses," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 99-126, December.
    8. Degeorge, Francois & Patel, Jayendu & Zeckhauser, Richard, 1999. "Earnings Management to Exceed Thresholds," The Journal of Business, University of Chicago Press, vol. 72(1), pages 1-33, January.
    9. Bhattacharya, Utpal & Daouk, Hazem & Welker, Michael, 2003. "The World Price of Earnings Opacity," Working Papers 127185, Cornell University, Department of Applied Economics and Management.
    10. Donald P. Morgan, 2002. "Rating Banks: Risk and Uncertainty in an Opaque Industry," American Economic Review, American Economic Association, vol. 92(4), pages 874-888, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bert Scholtens & Feng‐Ching Kang, 2013. "Corporate Social Responsibility and Earnings Management: Evidence from Asian Economies," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 20(2), pages 95-112, March.
    2. Hsueh-Li Huang & Lien-Wen Liang & Hai-Yen Chang & Hsiu-Yuan Hsu, 2021. "The Influence of Earnings Management and Board Characteristics on Company Efficiency," Sustainability, MDPI, vol. 13(21), pages 1-18, October.
    3. Chowdhury, Abu & Mollah, Sabur & Al Farooque, Omar, 2018. "Insider-trading, discretionary accruals and information asymmetry," The British Accounting Review, Elsevier, vol. 50(4), pages 341-363.
    4. Manish Kumar & Madhu Vij & Rishabh Goswami, 2021. "Effect of Real Earnings Management on Firm Performance: Evidence from India," Vision, , vol. 27(3), pages 386-396, June.
    5. Alexandra Fernandes & António Cerqueira & Elísio Brandão, 2017. "Tax and financial reporting aggressiveness: evidence from Europe," FEP Working Papers 597, Universidade do Porto, Faculdade de Economia do Porto.
    6. Fatima Alali & Bikki Jaggi, 2011. "Earnings versus capital ratios management: role of bank types and SFAS 114," Review of Quantitative Finance and Accounting, Springer, vol. 36(1), pages 105-132, January.
    7. Joanna Lizińska & Leszek Czapiewski, 2023. "Earnings Management amid the COVID-19 Financial Crisis: The Experience of Poland," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 93-112.
    8. Stavros Degiannakis & George Giannopoulos & Salma Ibrahim & Ivana Rozic, 2019. "Earnings management to avoid losses and earnings declines in Croatia," International Journal of Computational Economics and Econometrics, Inderscience Enterprises Ltd, vol. 9(3), pages 219-238.
    9. Fatima Abdul Hamid & Chaabane Oussama Houssem Eddine & Abdullah Mohamed Ayedh & Abdelghani Echchabi, 2014. "Firms' Financial And Corporate Governance Characteristics Association With Earning Management Practices: A Meta-Analysis Approach," Economic Review: Journal of Economics and Business, University of Tuzla, Faculty of Economics, vol. 12(2), pages 49-72.
    10. Julia, 2011. "About some difficulties with interpreting and measuring corporate performance," Bank i Kredyt, Narodowy Bank Polski, vol. 42(5), pages 41-60.
    11. Rachappa Shette, 2018. "Earnings Management to Avoid Losses: Evidence from India," Working papers 255, Indian Institute of Management Kozhikode.

    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. Tsipouridou, Maria & Spathis, Charalambos, 2012. "Earnings management and the role of auditors in an unusual IFRS context: The case of Greece," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 21(1), pages 62-78.
    2. Olivier Vidal, 2009. "Les Indicateurs D'Asymétrie Sont-Ils Pertinents Pour Étudier Les Seuils Comptables ?," Post-Print halshs-00458894, HAL.
    3. Lawrence D. Brown & Arianna Spina Pinello, 2007. "To What Extent Does the Financial Reporting Process Curb Earnings Surprise Games?," Journal of Accounting Research, Wiley Blackwell, vol. 45(5), pages 947-981, December.
    4. Chung-Hua Shen & Yu-Li Huang, 2013. "Effects of earnings management on bank cost of debt," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(1), pages 265-300, March.
    5. Olivier Vidal, 2009. "Are asymmetry measures relevant to analyze accounting thresholds? [Les Indicateurs D'Asymétrie Sont- Ils Pertinents Pour Étudier Les Seuils Comptables ?]," Post-Print hal-02104099, HAL.
    6. Bert Scholtens & Feng‐Ching Kang, 2013. "Corporate Social Responsibility and Earnings Management: Evidence from Asian Economies," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 20(2), pages 95-112, March.
    7. Qin, Yiyi & Cai, Jun & Rhee, S. Ghon, 2021. "Do Japanese firms systematically inflate expected rate of returns from defined benefit pension plans?," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    8. Houqe, Muhammad Nurul & van Zijl, Tony & Dunstan, Keitha & Karim, A.K.M. Waresul, 2012. "The Effect of IFRS Adoption and Investor Protection on Earnings Quality Around the World," The International Journal of Accounting, Elsevier, vol. 47(3), pages 333-355.
    9. Himanshu & Jatinder P. Singh & Ashwani Kumar, 2020. "Prioritizing and Establishing Cause and Effect Relationships Among Financial Reporting Quality Metrics," Vision, , vol. 24(3), pages 330-344, September.
    10. Xingqiang Du & Wei Jian & Shaojuan Lai & Yingjie Du & Hongmei Pei, 2015. "Does Religion Mitigate Earnings Management? Evidence from China," Journal of Business Ethics, Springer, vol. 131(3), pages 699-749, October.
    11. Stavros Degiannakis & George Giannopoulos & Salma Ibrahim & Ivana Rozic, 2019. "Earnings management to avoid losses and earnings declines in Croatia," International Journal of Computational Economics and Econometrics, Inderscience Enterprises Ltd, vol. 9(3), pages 219-238.
    12. Anis Ben Amar & Islem Turki, 2022. "Temporal Evidence on Threshold Hierarchy Based on Accruals and Real Earnings Management: Evidence from France And The US," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 21(3), pages 373-396, September.
    13. Martin Walker, 2013. "How far can we trust earnings numbers? What research tells us about earnings management," Accounting and Business Research, Taylor & Francis Journals, vol. 43(4), pages 445-481, August.
    14. Thomas Dilger & Sabine Graschitz, 2015. "Influencing Factors on Earnings Management, Empirical Evidence from Listed German and Austrian Companies," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 8(2), pages 69-86, October.
    15. Pelham Gore & Peter Pope & Ashni Singh, 2007. "Earnings management and the distribution of earnings relative to targets: UK evidence," Accounting and Business Research, Taylor & Francis Journals, vol. 37(2), pages 123-149.
    16. Andreas Charitou & Irene Karamanou & Anastasia Kopita, 2018. "The determinants and valuation effects of classification choice on the statement of cash flows," Accounting and Business Research, Taylor & Francis Journals, vol. 48(6), pages 613-650, September.
    17. Chardonnens, Patrick & Fiechter, Peter & Wallmeier, Martin, 2022. "The disappearance of the zero-earnings discontinuity: SOX, dotcom boom or gradual decline?," Finance Research Letters, Elsevier, vol. 49(C).
    18. Dechow, Patricia & Ge, Weili & Schrand, Catherine, 2010. "Understanding earnings quality: A review of the proxies, their determinants and their consequences," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 344-401, December.
    19. Barua, Abhijit & Kim, Jung Hoon & Yi, Sheng, 2019. "Hierarchy of earnings thresholds based on discretionary accruals," Advances in accounting, Elsevier, vol. 44(C), pages 29-48.
    20. Bilinski, Pawel & Lyssimachou, Danielle, 2018. "Dividend guidance to manage analyst dividend expectations," International Review of Financial Analysis, Elsevier, vol. 60(C), pages 53-68.

    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:eee:mulfin:v:19:y:2009:i:3:p:221-236. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/mulfin .

    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.