Earnings management during the global financial crisis: evidence from Australia

Abu MOLLIK, Monir MIR, Md Khokan Bepari, Ron McIver

    Research output: A Conference proceeding or a Chapter in BookConference contribution

    Abstract

    This paper examines if Australian firms engaged in a higher level of earnings management during the global financial crisis (GFC) and if there was any industry effect on firms’ earnings management. During financial crises many firms experience a systematic decline in incomes, and majority of them report a fall in earnings or losses. The onset of a financial crisis may, therefore, trigger or magnify managerial motives to engage in earnings management, attributing the reduced earnings (or losses) to the macroeconomic shocks rather than to poor managerial performance. Earnings management has been defined in terms of the discretionary components of total accruals. We use parametric and non-parametric tests and panel data regression methods to analyse the impact of the GFC and industry effect on the discretionary accruals sample comprised of 149 Australian firms during the 2006 to 2009 period. We find that Australian firms engaged in a higher level of income-decreasing earnings management during the GFC. This finding is consistent with that of earlier research in the Asian Financial Crisis context. We also find that firms’ industry classification has statistically significant effect on their earnings management.
    Original languageEnglish
    Title of host publicationProceedings of International Business and Social Sciences Research Conference
    EditorsMd Mahbubul Hoque Bhuiyan
    Place of PublicationMelbourne
    PublisherWorld Business Institute Australia
    Pages1-27
    Number of pages27
    ISBN (Print)9781922069382
    Publication statusPublished - 2013
    EventInternational Business and Social Sciences Research Conference - Cancun, Cancun, Mexico
    Duration: 16 Dec 201318 Dec 2013

    Conference

    ConferenceInternational Business and Social Sciences Research Conference
    CountryMexico
    CityCancun
    Period16/12/1318/12/13

    Fingerprint

    Earnings management
    Global financial crisis
    Industry effects
    Income
    Financial crisis
    Financial industry
    Industry classification
    Accruals
    Macroeconomic shocks
    Panel data
    Discretionary accruals
    Managerial performance
    Asian financial crisis
    Trigger
    Nonparametric test
    Regression method

    Cite this

    MOLLIK, A., MIR, M., Bepari, M. K., & McIver, R. (2013). Earnings management during the global financial crisis: evidence from Australia. In M. M. H. Bhuiyan (Ed.), Proceedings of International Business and Social Sciences Research Conference (pp. 1-27). Melbourne: World Business Institute Australia.
    MOLLIK, Abu ; MIR, Monir ; Bepari, Md Khokan ; McIver, Ron. / Earnings management during the global financial crisis: evidence from Australia. Proceedings of International Business and Social Sciences Research Conference. editor / Md Mahbubul Hoque Bhuiyan. Melbourne : World Business Institute Australia, 2013. pp. 1-27
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    abstract = "This paper examines if Australian firms engaged in a higher level of earnings management during the global financial crisis (GFC) and if there was any industry effect on firms’ earnings management. During financial crises many firms experience a systematic decline in incomes, and majority of them report a fall in earnings or losses. The onset of a financial crisis may, therefore, trigger or magnify managerial motives to engage in earnings management, attributing the reduced earnings (or losses) to the macroeconomic shocks rather than to poor managerial performance. Earnings management has been defined in terms of the discretionary components of total accruals. We use parametric and non-parametric tests and panel data regression methods to analyse the impact of the GFC and industry effect on the discretionary accruals sample comprised of 149 Australian firms during the 2006 to 2009 period. We find that Australian firms engaged in a higher level of income-decreasing earnings management during the GFC. This finding is consistent with that of earlier research in the Asian Financial Crisis context. We also find that firms’ industry classification has statistically significant effect on their earnings management.",
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    MOLLIK, A, MIR, M, Bepari, MK & McIver, R 2013, Earnings management during the global financial crisis: evidence from Australia. in MMH Bhuiyan (ed.), Proceedings of International Business and Social Sciences Research Conference. World Business Institute Australia, Melbourne, pp. 1-27, International Business and Social Sciences Research Conference, Cancun, Mexico, 16/12/13.

    Earnings management during the global financial crisis: evidence from Australia. / MOLLIK, Abu; MIR, Monir; Bepari, Md Khokan; McIver, Ron.

    Proceedings of International Business and Social Sciences Research Conference. ed. / Md Mahbubul Hoque Bhuiyan. Melbourne : World Business Institute Australia, 2013. p. 1-27.

    Research output: A Conference proceeding or a Chapter in BookConference contribution

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    AB - This paper examines if Australian firms engaged in a higher level of earnings management during the global financial crisis (GFC) and if there was any industry effect on firms’ earnings management. During financial crises many firms experience a systematic decline in incomes, and majority of them report a fall in earnings or losses. The onset of a financial crisis may, therefore, trigger or magnify managerial motives to engage in earnings management, attributing the reduced earnings (or losses) to the macroeconomic shocks rather than to poor managerial performance. Earnings management has been defined in terms of the discretionary components of total accruals. We use parametric and non-parametric tests and panel data regression methods to analyse the impact of the GFC and industry effect on the discretionary accruals sample comprised of 149 Australian firms during the 2006 to 2009 period. We find that Australian firms engaged in a higher level of income-decreasing earnings management during the GFC. This finding is consistent with that of earlier research in the Asian Financial Crisis context. We also find that firms’ industry classification has statistically significant effect on their earnings management.

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    MOLLIK A, MIR M, Bepari MK, McIver R. Earnings management during the global financial crisis: evidence from Australia. In Bhuiyan MMH, editor, Proceedings of International Business and Social Sciences Research Conference. Melbourne: World Business Institute Australia. 2013. p. 1-27