Impact of firm-level uncertainty on earnings management and role of accounting conservatism
This study investigates whether accounting conservatism can reduce earnings management in the wake of uncertainty. It is hypothesized that conservative reporting during uncertainty can reduce earnings management and increase firm value. Using 5354 firm-year observations from 2005-2018 through Khan a...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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AIMS Press
2019-01-01
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| Series: | Quantitative Finance and Economics |
| Subjects: | |
| Online Access: | https://www.aimspress.com/article/10.3934/QFE.2019.4.772/fulltext.html |
| _version_ | 1829142679935516672 |
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| author | Abdul Haque Huma Fatima Ammar Abid Muhammad Ali Jibran Qamar |
| author_facet | Abdul Haque Huma Fatima Ammar Abid Muhammad Ali Jibran Qamar |
| author_sort | Abdul Haque |
| collection | DOAJ |
| description | This study investigates whether accounting conservatism can reduce earnings management in the wake of uncertainty. It is hypothesized that conservative reporting during uncertainty can reduce earnings management and increase firm value. Using 5354 firm-year observations from 2005-2018 through Khan and watts model, we provide evidence that accounting conservatism is a way to put limits on earnings management for firms facing uncertainty. We find a statistically significant impact of conservative reporting on firm value during an uncertainty. Uncertainty at the firm level is measured by applying “prospector” and “defender” business strategy. To measure earnings management Modified Jones model and Dechow and Dichev approach models applied. Our results provide insights into conservative accounting and have critical and practical implications for investors, researchers and standard setters. After addressing endogeneity and applying GMM estimator, our results remain confirmed. |
| first_indexed | 2024-12-14T20:35:36Z |
| format | Article |
| id | doaj.art-86858a4f3f3342ef95986873a472447c |
| institution | Directory Open Access Journal |
| issn | 2573-0134 |
| language | English |
| last_indexed | 2024-12-14T20:35:36Z |
| publishDate | 2019-01-01 |
| publisher | AIMS Press |
| record_format | Article |
| series | Quantitative Finance and Economics |
| spelling | doaj.art-86858a4f3f3342ef95986873a472447c2022-12-21T22:48:24ZengAIMS PressQuantitative Finance and Economics2573-01342019-01-013477279410.3934/QFE.2019.4.772Impact of firm-level uncertainty on earnings management and role of accounting conservatismAbdul Haque0Huma Fatima1Ammar Abid2Muhammad Ali Jibran Qamar31 Department of Economics, COMSATS University Islamabad, Lahore Campus, Lahore, Pakistan2 Department of Management Sciences, COMSATS University Islamabad, Lahore Campus, Lahore, Pakistan2 Department of Management Sciences, COMSATS University Islamabad, Lahore Campus, Lahore, Pakistan2 Department of Management Sciences, COMSATS University Islamabad, Lahore Campus, Lahore, PakistanThis study investigates whether accounting conservatism can reduce earnings management in the wake of uncertainty. It is hypothesized that conservative reporting during uncertainty can reduce earnings management and increase firm value. Using 5354 firm-year observations from 2005-2018 through Khan and watts model, we provide evidence that accounting conservatism is a way to put limits on earnings management for firms facing uncertainty. We find a statistically significant impact of conservative reporting on firm value during an uncertainty. Uncertainty at the firm level is measured by applying “prospector” and “defender” business strategy. To measure earnings management Modified Jones model and Dechow and Dichev approach models applied. Our results provide insights into conservative accounting and have critical and practical implications for investors, researchers and standard setters. After addressing endogeneity and applying GMM estimator, our results remain confirmed.https://www.aimspress.com/article/10.3934/QFE.2019.4.772/fulltext.htmluncertaintyearnings managementaccounting conservatism |
| spellingShingle | Abdul Haque Huma Fatima Ammar Abid Muhammad Ali Jibran Qamar Impact of firm-level uncertainty on earnings management and role of accounting conservatism Quantitative Finance and Economics uncertainty earnings management accounting conservatism |
| title | Impact of firm-level uncertainty on earnings management and role of accounting conservatism |
| title_full | Impact of firm-level uncertainty on earnings management and role of accounting conservatism |
| title_fullStr | Impact of firm-level uncertainty on earnings management and role of accounting conservatism |
| title_full_unstemmed | Impact of firm-level uncertainty on earnings management and role of accounting conservatism |
| title_short | Impact of firm-level uncertainty on earnings management and role of accounting conservatism |
| title_sort | impact of firm level uncertainty on earnings management and role of accounting conservatism |
| topic | uncertainty earnings management accounting conservatism |
| url | https://www.aimspress.com/article/10.3934/QFE.2019.4.772/fulltext.html |
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