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Earnings management para evitar reportar pérdidas: Chile, 2010-2014

Author

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  • Cornejo-Saavedra, Edinson Edgardo

    (Universidad del Bío-Bío)

Abstract

Purpose – This paper aims to examine whether a sample of non-financial Chilean firms performed earnings management to avoid the decreases and losses in the earnings during the 2010-2014 period. Design/methodology/approach – The analysis is undertaken using the distributions of earnings changes and earnings, according to Burgstahler and Dichev (1997) methodology. Findings – The results showed unusually low frequencies of small losses and small declines in earnings and unusually high frequencies of small benefits and small increases in earnings. Both results were statistically significant. Practical implications – The study presents evidence of possible earnings management activity to avoid reporting losses and earnings decreases during the period 2010-2014. These results would allow to identify “suspicious” companies of earnings management and would increase the likelihood of detecting firms that managed upside the reported earnings or that – in an extreme case –would be committing a fraud not disclosed. Originality/value – The results of these types of studies would be useful to carry out monitoring and control activities, to increase transparency in the stock market.

Suggested Citation

  • Cornejo-Saavedra, Edinson Edgardo, 2018. "Earnings management para evitar reportar pérdidas: Chile, 2010-2014," Journal of Economics, Finance and Administrative Science, Universidad ESAN, vol. 23(45), pages 167-181.
    • Handle: RePEc:ris:joefas:0126
    as

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    Cited by:

    1. Tobar Arias, José E. & Mora Valencia, Andrés & Benavides Franco, Julián, 2023. "Earnings management to avoid losses: Evidence in non-listed Colombian companies," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 53(C).

    More about this item

    Keywords

    Earnings management; Losses; Earnings; Frequency distribution; Profit threshold;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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