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Earnings Management to Meet Earnings Benchmarks: The Impact on Future Performance

The Economic Research Guardian, 2021-01, Vol.11 (1), p.78-102

2021. This work is published under https://creativecommons.org/licenses/by-nc-nd/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;EISSN: 2247-8531

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  • Title:
    Earnings Management to Meet Earnings Benchmarks: The Impact on Future Performance
  • Author: Sudheesh, Kunnathodi ; Nidheesh, Kallumukku Balan
  • Subjects: Accounting ; Corporate profits ; Earnings management ; Financial reporting ; Profitability ; Stockholders
  • Is Part Of: The Economic Research Guardian, 2021-01, Vol.11 (1), p.78-102
  • Description: The present study investigates whether firms manipulate earnings to attain specific benchmarks (viz. yero and previous years earnings) engage in opportunistic or signalling earnings management. Specifically, the study examines the relationship of discretionay accruals with the one year-ahead company performance. The study spans from 2012 to 2018 for 304firms listed in India. The panel corrected standard error (PCSE) regression estimator is usedfor the analysis. Our analysis finds evidence of efficient earnings management. Specifically, we find that the discretionary accruals offirms that manage earnings to meet the previous years profit have a significant positive association with future performance and signals the inside information about the future performance. Further, the results show weak evidence of the relationship between accrual earnings management and future performance among firms meeting yero earnings target. We also study how earnings management relates to the subsequent performance in the absence of earnings benchmarks. The findings show that managers, on average, undertake accrual earnings management to signal future performance.
  • Publisher: Dumbravita: Weissberg SRL
  • Language: English
  • Identifier: EISSN: 2247-8531
  • Source: ProQuest Central
    DOAJ Directory of Open Access Journals
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