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Industry characteristics and earnings management: a study of Malaysian industries

Author

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  • Shaista Wasiuzzaman

Abstract

Purpose - The purpose of this paper is to detect variations in earnings management activity across industries and the possible influence of various industry variables on these variations. Design/methodology/approach - A total sample of 4,249 firm-year observations from 13 different industries spanning a total of eight years (from 2005 to 2012) is used for this purpose. The ordinary least squares regression technique is used to test the influence of various industry variables on earnings management activity. Findings - The findings indicate the presence of earnings management practices in Malaysian industries. Among industry-level variables, capital intensity, volatility and profitability are found to influence aggregate earnings management. Further analysis shows that volatility only influences the smoothing measure while profitability influences the discretionary measure. Interestingly, industry competitiveness and leverage are not able to explain the variations in earnings management across industries. Originality/value - To the authors’ knowledge, this is the first study which documents the role of various industry characteristics in influencing earnings management activity. It highlights the importance of considering industry-level variables in a study on earnings management and, hence, adds to the growing literature on earnings management.

Suggested Citation

  • Shaista Wasiuzzaman, 2018. "Industry characteristics and earnings management: a study of Malaysian industries," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 13(5), pages 837-854, November.
    • Handle: RePEc:eme:ijoemp:ijoem-09-2017-0336
    DOI: 10.1108/IJoEM-09-2017-0336
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    Cited by:

    1. Michał Comporek & Iryna Shchyrba, 2024. "Assessing The Impact Of The Sars-Cov-2 Pandemic On Earnings Management Behaviour In Poland," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 10(1).

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