This paper provides a new approach to test for accrual-based earnings management. Our approach exploits the inherent property of accrual accounting that any accrual-based earnings management in one ...period must reverse in another period. If the researcher has priors concerning the timing of the reversal, incorporating these priors can significantly improve the power and specification of tests for earnings management. Our results indicate that tests incorporating reversals increase test power by around 40% and provide a robust solution for mitigating model misspecification arising from correlated omitted variables.
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Understanding the basics of financial accounting can be a tricky task to master. This practical guidebook provides an overview of the fundamental principles in a jargon-free and simple ...format.Financial Accounting: The Basics provides concise overviews of the key financial accounting topics supplemented by practical examples and exercises to enable readers to test their knowledge and understanding in bite-sized chunks. In empowering students to learn at their own pace, the book enhances course learning to maximise chances of overall success. Topics covered include:The interpretation of financial statements and the accounting equationProcessing accounting informationAccounting for inventoriesNon-current assets and depreciationCash flow statements and analysisWith the latest coverage of International Financial Reporting Standards (IFRS) terminology, and separate chapters on cash flow statements and ratio analysis, Ilias Basioudis's text will be valuable reading for new students of accounting.
This study aims to analyze and evaluate factors that influence students' intention to take whistleblowing actions against fraud in managing the organization's funds as an effort to prevent fraud. ...Students know that fraud has occurred but were unable to report due to friendship conflicts. This study seeks to fill the reseach gap, is looking at the phenomenon of student decision making in reporting fraud on managing student funds through the whistleblowing mechanism using Theory of Planned Behavior and incorporating moral norms into it. The results indicate that students' attitudes, subjective norms, and perceived behavioral control had obstacles to support the intention to take whistleblowing actions. However, only moral norms that students trigerred the moral basis in making decision to report or not to report. Though, most of the respondents stated that they had the intention to carry out whistleblowing. Thus of the four factors that influence student intentions and behavior in conducting whistleblowing actions moral norms were the most significant factor, which means students with only a strong moral norms will whistleblowing.
We examine whether the mandatory introduction of International Financial Reporting Standards leads to an increase in institutional investor demand for equities. Using a large ownership database ...covering all types of institutional investors from around the world, we find that institutional holdings increase for mandatory IFRS adopters. Changes in holdings are concentrated around first-time annual reporting events. Second, we document that the positive IFRS effects on institutional holdings are concentrated among investors whose orientation and styles suggest they are most likely to benefit from higher quality financial statements, including active, value, and growth investors. These results are consistent with holdings changes being associated with the financial reporting regime change. Finally, we show that increased institutional holdings are concentrated in countries in which enforcement and reporting incentives are strongest, and where the differences between local GAAP and IFRS are relatively high. Overall, our study helps shed new light on the channels by which IFRS information becomes impounded in market outcomes.
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This paper examines how capital market pressures and institutional factors shape firms' incentives to report earnings that reflect economic performance. To isolate the effects of reporting ...incentives, we exploit the fact that, within the European Union, privately held corporations face the same accounting standards as publicly traded companies because accounting regulation is based on legal form. We focus on the level of earnings management as one dimension of accounting quality that is particularly responsive to firms' reporting incentives. We document that private firms exhibit higher levels of earnings management and that strong legal systems are associated with less earnings management in private and public firms. We also provide evidence that private and public firms respond differentially to institutional factors, such as book-tax alignment, outside investor protection, and capital market structure. Moreover, legal institutions and capital market forces often appear to reinforce each other.
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The corporate information environment develops endogenously as a consequence of information asymmetries and agency problems between investors, entrepreneurs, and managers. We review current research ...on the three main decisions that shape the corporate information environment in capital market settings: (1) managers’ voluntary disclosure decisions, (2) disclosures mandated by regulators, and (3) reporting decisions by analysts. We conclude that, in the last ten years, research has generated several useful insights. Despite this progress, we call for researchers to consider interdependencies between the various decisions that shape the corporate information environment and suggest new and interesting issues for researchers to address.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
This paper identifies challenges and opportunities created by global financial reporting for the education and research activities of U.S. academics. Relating to education, after overviewing the ...relation between global financial reporting and U.S. GAAP, it offers suggestions for topics to be covered in global financial reporting curricula and clarifies common misunderstandings about the concepts underlying financial reporting. Relating to research, it explains how and why research can provide meaningful input into standard-setting, and identifies questions that can motivate research related to topics on the International Accounting Standards Board's technical agenda and to the globalization of financial reporting.
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This paper examines the
ex post and
ex ante benefits of accounting conservatism to lenders and borrowers in the debt contracting process. I expect conservatism to benefit lenders
ex post through the ...timely signaling of default risk, as manifested by accelerated covenant violations, and to benefit borrowers
ex ante through lower initial interest rates. Consistent with these predictions, I find that more conservative borrowers are more likely to violate debt covenants following a negative price shock, and that lenders offer lower interest rates to more conservative borrowers.
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