The interaction between accounting and real earnings management using simultaneous equation model with panel data

Review of Quantitative Finance and Accounting - Tập 53 - Trang 1195-1227 - 2018
Sarra Elleuch Hamza1, Nassira Kortas1
1ISCAE, Manouba, Tunisia

Tóm tắt

The aim of this paper is to examine the association between accounting-based earnings management and real activities manipulation in a weaker regulatory environment. We measure accruals-based earnings management by modified Jones model. Real earnings management is identified through sales manipulation and discretionary expenditures. The relationship between accruals-based earnings management and real earnings management is examined by using simultaneous equation systems estimated with panel data. Based on a sample of Tunisian public offering firms, our findings support not only a complementary relationship between sales manipulation and accruals-based earnings management, but also a substitutive interaction between discretionary expenditures and accruals management. Tunisian firms do not face greater scrutiny from regulators and jointly use the two alternatives of earnings management. However, when income taxation becomes the main incentive for earnings management, Tunisian firms prefer real earnings management to discretionary accrual. It implies that accounting earnings management is jointly used with some real earnings management tools and serves as substitutes for other real activities manipulations. Contrary to results of previous studies, managers can use the two earnings management alternatives as substitutes and complementary tools at the same time.

Tài liệu tham khảo

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