Earnings management and impression management: European evidence
This study explores the relationship between Earnings Management and Impression Management in the context of some European listed companies. The analysis focuses on the readability of annual reports, measured by the file size. Earnings management is assessed using the modified Jones model. The sampl...
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2022-04-01
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| Series: | Problems and Perspectives in Management |
| Subjects: | |
| Online Access: | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/16323/PPM_2022_01_Goncalves.pdf |
| _version_ | 1818273145417629696 |
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| author | Tiago Goncalves Cristina Gaio Pedro Ramos |
| author_facet | Tiago Goncalves Cristina Gaio Pedro Ramos |
| author_sort | Tiago Goncalves |
| collection | DOAJ |
| description | This study explores the relationship between Earnings Management and Impression Management in the context of some European listed companies. The analysis focuses on the readability of annual reports, measured by the file size. Earnings management is assessed using the modified Jones model. The sample consists of 2,953 listed companies from 17 industries of 24 European countries between 2012 and 2018 resulting in 13,020 firm-year observations. It has been found that one standard deviation increase in financial reports file size increases discretionary accruals in around 4%. These results are robust across different sample specifications in terms of firms’ size, industry and country. The findings show that increased intensity in the use of discretionary accruals is obfuscated by the disclosure of less readable annual reports, implying that Earnings Management and Impression Management are used complementarily. The conclusions have impact both for investment management and for policy, preventing inefficient allocation of capital budgeting and providing additional information that improves regulation on financial reporting transparency.
AcknowledgmentThe authors are grateful to financial support from FCT – Fundação para a Ciência e Tecnologia (Portugal), national funding through research grant (UID/SOC/04521/2020). |
| first_indexed | 2024-12-12T21:53:18Z |
| format | Article |
| id | doaj.art-33015b0a3890448d9d21419702e6eca5 |
| institution | Directory Open Access Journal |
| issn | 1727-7051 1810-5467 |
| language | English |
| last_indexed | 2024-12-12T21:53:18Z |
| publishDate | 2022-04-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Problems and Perspectives in Management |
| spelling | doaj.art-33015b0a3890448d9d21419702e6eca52022-12-22T00:10:44ZengLLC "CPC "Business Perspectives"Problems and Perspectives in Management1727-70511810-54672022-04-0120145947210.21511/ppm.20(1).2022.3716323Earnings management and impression management: European evidenceTiago Goncalves0https://orcid.org/0000-0002-1031-0032Cristina Gaio1https://orcid.org/0000-0002-4906-1547Pedro Ramos2https://orcid.org/0000-0002-9158-4245Ph.D., Assistant Professor, ISEG Lisbon School of Economics & Management, Department of Management, University of LisbonPh.D., Assistant Professor, ISEG Lisbon School of Economics & Management, Department of Management University of LisbonM.Sc., ISEG Lisbon School of Economics & Management, Department of Management, University of LisbonThis study explores the relationship between Earnings Management and Impression Management in the context of some European listed companies. The analysis focuses on the readability of annual reports, measured by the file size. Earnings management is assessed using the modified Jones model. The sample consists of 2,953 listed companies from 17 industries of 24 European countries between 2012 and 2018 resulting in 13,020 firm-year observations. It has been found that one standard deviation increase in financial reports file size increases discretionary accruals in around 4%. These results are robust across different sample specifications in terms of firms’ size, industry and country. The findings show that increased intensity in the use of discretionary accruals is obfuscated by the disclosure of less readable annual reports, implying that Earnings Management and Impression Management are used complementarily. The conclusions have impact both for investment management and for policy, preventing inefficient allocation of capital budgeting and providing additional information that improves regulation on financial reporting transparency. AcknowledgmentThe authors are grateful to financial support from FCT – Fundação para a Ciência e Tecnologia (Portugal), national funding through research grant (UID/SOC/04521/2020).https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/16323/PPM_2022_01_Goncalves.pdfdiscretionary accrualsfinancial reporting qualityobfuscation hypothesisreadability of annual reports |
| spellingShingle | Tiago Goncalves Cristina Gaio Pedro Ramos Earnings management and impression management: European evidence Problems and Perspectives in Management discretionary accruals financial reporting quality obfuscation hypothesis readability of annual reports |
| title | Earnings management and impression management: European evidence |
| title_full | Earnings management and impression management: European evidence |
| title_fullStr | Earnings management and impression management: European evidence |
| title_full_unstemmed | Earnings management and impression management: European evidence |
| title_short | Earnings management and impression management: European evidence |
| title_sort | earnings management and impression management european evidence |
| topic | discretionary accruals financial reporting quality obfuscation hypothesis readability of annual reports |
| url | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/16323/PPM_2022_01_Goncalves.pdf |
| work_keys_str_mv | AT tiagogoncalves earningsmanagementandimpressionmanagementeuropeanevidence AT cristinagaio earningsmanagementandimpressionmanagementeuropeanevidence AT pedroramos earningsmanagementandimpressionmanagementeuropeanevidence |