Managerial ability and earnings management
DOI:
https://doi.org/10.5007/2175-8069.2022.e79278Keywords:
Managerial Ability, Earnings Management, AEM, REMAbstract
The study aims to verify the relationship between the managerial ability of managers and the level of earnings management by accruals (AEM) and by real activities (REM) in Brazilian companies. Data from 2013 to 2018, corresponding to 228 non-financial companies, were analyzed through regression TOBIT. The results support a positive relationship between managerial ability and earnings management practices by accruals and real activities. Specifically, more skilled managers are associated with earnings management, which reduces the quality of accounting information. The findings support the premise that more skilled managers manage financial reporting to camouflage compensation, privileges, and excessive investment in risky projects. Furthermore, it sheds light on how individual idiosyncratic differences can affect accounting reports.
References
Almeida, D. M., & Bezerra, A. F. (2012). Influência do fluxo de caixa operacional no gerenciamento de resultados em empresas da construção civil listadas na BM&FBovespa. BASE-Revista de Administração e Contabilidade da Unisinos (ISSN: 1984-8196), 9(3), 228-238.
Andreou, P. C., Karasamani, I., Louca, C., & Ehrlich, D. (2017). The impact of managerial ability on crisis-period corporate investment. Journal of Business Research, 79, 107-122. https://doi.org/10.1016/j.jbusres.2017.05.022
Azevedo, F. B., & Costa, F. M. (2012). Efeito da troca da firma de auditoria no gerenciamento de resultados das companhias abertas brasileiras. Revista de Administração Mackenzie, 13, 65-100. https://doi.org/10.1590/S1678-69712012000500004
Baik B., Choi S., & Farber D. B. (2019) Managerial Ability and Income Smoothing. The Accounting Review In-Press. https://doi.org/10.2308/accr-52600
Baik, B., Brockman, P. A., Farber, D. B., & Lee, S. (2018). Managerial Ability and the Quality of Firms’ Information Environment. Journal of Accounting, Auditing & Finance, 33(4), 506-527. https://doi.org/10.1177/0148558X17742820
Bamber, L. S., Jiang, J., & Wang, I. Y. (2010). What’s my style? The influence of top managers on voluntary corporate financial disclosure. The Accounting Review, 85(4), 1131-1162. https://doi.org/10.2308/accr.2010.85.4.1131
Barros, C. M., Soares, R. O., & de Lima, G. A. F. (2013). A relação entre governança corporativa e gerenciamento de resultados em empresas brasileiras. Revista de Contabilidade e Organizações, 7(19), 27-39. https://doi.org/10.11606/rco.v7i19.55509
Becker, C. L., DeFond, M. L., Jiambalvo, J., & Subramanyam, K. R. (1998). The effect of audit quality on earnings management. Contemporary accounting research, 15(1), 1-24. https://doi.org/10.1111/j.1911-3846.1998.tb00547.x
Bernardo, C. J., Albanez, T., & Securato, J. R. (2018). Fatores Macroeconômicos e Institucionais, Composição do Endividamento e Estrutura de Capital de Empresas Latino-Americanas. BBR. Brazilian Business Review, 15, 152-174. http://dx.doi.org/10.15728/bbr.2018.15.2.4
Bertrand, M., & Schoar, A. (2003). Managing with style: the effect of managers on firm policies. The Quarterly Journal of Economics, 118(4), 1169-1208. https://doi.org/10.1162/003355303322552775
Braam, G., Nandy, M., Weitzel, U., & Lodh, S. (2015). Accrual-based and real earnings management and political connections. The International Journal of Accounting, 50(2), 111-141. https://doi.org/10.1016/j.intacc.2013.10.009
Bruns, W., & Merchant, K. (1990). The dangerous morality of managing earnings. Management Accounting, 72(2), 22-25. Recuperado em: https://www.hbs.edu/faculty/Pages/item.aspx?num=2605
Chang, Y. Y., Dasgupta, S., & Hilary, G. (2010). CEO ability, pay, and firm performance. Management Science, 56(10), 1633-1652. https://doi.org/10.1287/mnsc.1100.1205
Cheng, Q., & Warfield, T. D. (2005). Equity incentives and earnings management. The Accounting Review, 80(2), 441-476. https://doi.org/10.2308/accr.2005.80.2.441
Coelho, A. C. D., & Lopes, A. B. (2007). Avaliação da prática de gerenciamento de resultados na apuração de lucro por companhias abertas brasileiras conforme seu grau de alavancagem financeira. Revista de Administração Contemporânea, 11(SPE2), 121-144.
Coff, R. W. (1997). Human assets and management dilemmas: Coping with hazards on the road to resource-based theory. Academy of Management Review, 22(2), 374-402. https://doi.org/10.5465/amr.1997.9707154063
Cohen, D. A., & Zarowin, P. (2010). Accrual-based and real earnings management activities around seasoned equity offerings. Journal of Accounting and Economics, 50(1), 2-19. https://doi.org/10.1016/j.jacceco.2010.01.002
Cupertino, C. M., Martinez, A. L., & Costa Jr, N. C. A. D. (2016). Consequências para a rentabilidade futura com o gerenciamento de resultados por meio de atividades operacionais reais. Revista Contabilidade & Finanças, 27, 232-242. https://doi.org/10.1590/1808-057x201602520
Dechow, P. M., & Dichev, I. D. (2002). The quality of accruals and earnings: The role of accrual estimation errors. The Accounting Review, 77(s-1), 35-59. https://doi.org/10.1016/j.jacceco.2010.09.001
Dechow, P., Ge, W., & Schrand, C. (2010). Understanding earnings quality: A review of the proxies, their determinants and their consequences. Journal of Accounting and Economics, 50(2-3), 344-401. https://doi.org/10.1016/j.jacceco.2010.09.001
Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting earnings management. The Accounting Review, 70(2), 193-225. https://doi.org/10.1111/jbfa.12012
Dejong, D., & Ling, Z. (2013). Managers: Their effects on accruals and firm policies. Journal of Business Finance & Accounting, 40(1-2), 82-114. https://doi.org/10.1111/jbfa.12012
Demerjian, P. R., Lev, B., & McVay, S. (2012). Quantifying managerial ability: A new measure and validity tests. Management Science, 58(7), 1229-1248. https://doi.org/10.1287/mnsc.1110.1487
Demerjian, P. R., Lev, B., Lewis, M. F., & McVay, S. E. (2013). Managerial ability and earnings quality. The Accounting Review, 88(2), 463-498. https://doi.org/10.2308/accr-50318
Demerjian, P. R., Lewis-Western, M. F., & McVay, S. (2017). How does intentional earnings smoothing vary with managerial ability? Journal of Accounting, Auditing & Finance, 1-32. https://doi.org/10.1177/0148558X17748405
Dyreng, S. D., Hanlon, M., & Maydew, E. L. (2010). The effects of executives on corporate tax avoidance. The Accounting Review, 85(4), 1163-1189. https://doi.org/10.2308/accr.2010.85.4.1163
Francis, J. R., Maydew, E. L., & Sparks, H. C. (1999). The role of Big 6 auditors in the credible reporting of accruals. Auditing: a Journal of Practice & Theory, 18(2), 17-34. https://doi.org/10.2308/aud.1999.18.2.17
Francis, B., Sun, X., & Wu, Q. (2013). Managerial Ability and Tax Aggressiveness. SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.2348695
Gabaix, X., & Landier, A. (2008). Why has CEO pay increased so much? The Quarterly Journal of Economics, 123(1), 49-100. https://doi.org/10.1162/qjec.2008.123.1.49
García-Meca, E., & García-Sánchez, I. M. (2018). Does managerial ability influence the quality of financial reporting? European Management Journal, 36(4), 544-557. https://doi.org/10.1080/09638180.2018.1454336
Ge, W., Matsumoto, D., & Zhang, J. L. (2011). Do CFOs have style? An empirical investigation of the effect of individual CFOs on accounting practices. Contemporary Accounting Research, 28(4), 1141-1179. https://doi.org/10.1111/j.1911-3846.2011.01097.x
González, J. S., & García-Meca, E. (2014). Does corporate governance influence earnings management in Latin American markets?. Journal of business ethics, 121(3), 419-440. Doi: https://doi.org/10.1007/s10551-013-1700-8
Gounopoulos, D., & Pham, H. (2018). Financial Expert CEOs and Earnings Management Around Initial Public Offerings. The International Journal of Accounting, 53(2), 102-117. https://doi.org/10.1016/j.intacc.2018.04.002
Graham, J. R., Harvey, C. R., & Rajgopal, S. (2005). The economic implications of corporate financial reporting. Journal of Accounting and Economics, 40, 3-73. https://doi.org/10.1016/j.jacceco.2005.01.002
Habib, A., & Hasan, M. M. (2017). Managerial ability, investment efficiency and stock price crash risk. Research in International Business and Finance, 42, 262-274. https://doi.org/10.1016/j.ribaf.2017.07.048
Hambrick, D. C. (2007). Upper echelons theory: an update. Academy of Management Review, 32(2), 334–343. https://doi.org/10.5465/amr.2007.24345254
Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: the organization as a reflection of its top managers. Academy of Management Review, 9, 193-206. https://doi.org/10.5465/amr.1984.4277628
Hasan, M. M. (2018). Readability of narrative disclosures in 10-K reports: Does managerial ability matter? European Accounting Review, 1-22. https://doi.org/10.1080/09638180.2018.1528169
Healy, P. M., & Wahlen, J. M. (1999). A review of the earnings management literature and its implications for standard setting. Accounting Horizons, 13(4), 365-383. https://doi.org/10.2308/acch.1999.13.4.365
Hribar, P., & Nichols, C. (2007). Does conservative stock option accounting lead to aggressive cash flow reporting?. Available at SSRN 996102
Hribar, P., & Collins, D. W. (2002). Errors in estimating accruals: Implications for empirical research. Journal of Accounting Research, 40(1), 105-134. https://doi.org/10.1111/1475-679X.00041
Hsieh, Y. T., Chen, T. K., Tseng, Y. J., & Lin, R. C. (2018). Top management team characteristics and accrual-based earnings management. The International Journal of Accounting, 53(4), 314-334. https://doi.org/10.1016/j.intacc.2018.11.004
Huang, X. S., & Sun, L. (2017). Managerial ability and real earnings management. Advances in Accounting, 39, 91-104. https://doi.org/10.1016/j.adiac.2017.08.003
John, K., Ravid, S. A., & Sunder, J. (2017). Managerial ability and success: Evidence from the career paths of film directors. Journal of Corporate Finance, 44, 425-439. https://doi.org/10.1016/j.jcorpfin.2014.11.001
Jones, J. J. (1991). Earnings management during import relief investigations. Journal of Accounting Research, 29(2), 193-228. https://doi.org/10.2307/2491047
Jorge, S., & Armada, M. J. D. R. (2001). Factores determinantes do endividamento: uma análise em painel. Revista de Administração Contemporânea, 5, 9-31. https://doi.org/10.1590/S1415-65552001000200002
Klann, R. C., & Beuren, I. M. (2018). Earnings management IFRS adoption in Brazilian and British companies. International Journal of Disclosure and Governance, 15(1), 13-28. https://doi.org/10.1057/s41310-018-0032-4
Klein, A. (2002). Audit committee, board of director characteristics, and earnings management. Journal of Accounting and Economics, 33(3), 375-400. https://doi.org/10.1016/S0165-4101(02)00059-9
Koh, K. (2011). Value or glamour? An empirical investigation of the effect of celebrity CEOs on financial reporting practices and firm performance. Accounting & Finance, 51(2), 517-547. https://doi.org/10.1111/j.1467-629X.2010.00357.x
Kothari, S. P., Leone, A. J., & Wasley, C. E. (2005). Performance matched discretionary accrual measures. Journal of Accounting and Economics, 39(1), 163-197. https://doi.org/10.1016/j.jacceco.2004.11.002
Krishnan, G. V., & Wang, C. (2015). The relation between managerial ability and audit fees and going concern opinions. Auditing: A Journal of Practice & Theory, 34(3), 139-160. https://doi.org/10.2308/ajpt-50985
LaFond, R. (2008). Discussion of “CEO Reputation and Earnings Quality”. Contemporary Accounting Research, 25(1), 149-156. https://doi.org/10.1506/car.25.1.5
Lang, M., Raedy, J. S., & Yetman, M. H. (2003). How representative are firms that are cross‐listed in the United States? An analysis of accounting quality. Journal of Accounting Research, 41(2), 363-386.
La Porta, R, Silanes, F. L., Shleifer, A., & Vishny, R. W. (1998). Law and finance. Journal of Political Economy, 106(6), 1113-1155. https://doi.org/10.1086/250042
Leuz, C., Nanda, D., & Wysocki, P. D. (2003). Earnings management and investor protection: an international comparison. Journal of Financial Economics, 69(3), 505-527. https://doi.org/10.1016/S0304-405X(03)00121-1
Li, H. (2018). Unconditional Accounting Conservatism and Real Earnings Management. International Journal of Financial Research, 9(2), 203-215. https://doi.org/10.5430/ijfr.v9n2p203
Libby, R., & Seybert, N. (2009). Behavioral studies of the effects of regulation on earnings management and accounting choice. Accounting Organizations, and Institutions: essays for Anthony Hopwood. Oxford, U.K.: Oxford University Press, 290-314 .
Mahoney, J. T. (1995). The management of resources and the resource of management. Journal of Business Research, 33(2), 91-101. https://doi.org/10.1016/0148-2963(94)00060-R
Malmendier, U., & Tate, G. (2009). Superstar ceos. The Quarterly Journal of Economics, 124(4), 1593-1638. https://doi.org/10.1162/qjec.2009.124.4.1593
Costa, C. M., Matte, A. M., & Monte-Mor, D. S. (2018). Endividamento e decisões contábeis: a relação não linear entre dívida e qualidade dos lucros. Revista de Contabilidade e Organizações, 12, 1-16: https://doi.org/10.11606/issn.1982-6486.rco.2018.137077
Mazzioni, S., Prigol, V., de Moura, G. D., & Klann, R. C. (2015). Influência da governança corporativa e da estrutura de capital no gerenciamento de resultados. Revista Contemporânea de Contabilidade, 12(27), 61-86. https://doi.org/10.5007/2175-8069.2015v12n27p61
Moura, G. D., Fank, D. R. B., Mazzioni, S., Angonese, R., & Silva, G. (2019). Habilidade Gerencial E Perdas Do Valor Recuperável Do Goodwill. Revista de Educação e Pesquisa em Contabilidade (REPeC), 13(2). https://doi.org/10.17524/repec.v13i2.2002
Nardi, P. C. C., & Nakao, S. H. (2009). Gerenciamento de resultados e a relação com o custo da dívida das empresas brasileiras abertas. Revista Contabilidade & Finanças, 20, 77-100. https://doi.org/10.1590/S1519-70772009000300006
Notbohm, M., Campbell, K., Smedema, A. R., & Zhang, T. (2019). Management’s personal ideology and financial reporting quality. Review of Quantitative Finance and Accounting, 52(2), 521-571. https://doi.org/10.1007/s11156-018-0718-5
Park, J., Ko, C. Y., Jung, H., & Lee, Y. S. (2016). Managerial ability and tax avoidance: evidence from Korea. Asia-Pacific Journal of Accounting & Economics, 23(4), 449-477. https://doi.org/10.1080/16081625.2015.1017590
Paulo, E., Martins, E., & Corrar, L. J. (2007). Detecção do gerenciamento de resultados pela análise do diferimento tributário. Revista de Administração de Empresas, 47(1), 46-59. https://doi.org/10.1590/S0034-75902007000100005
Roychowdhury, S. (2006). Earnings management through real activities manipulation. Journal of Accounting and Economics, 42(3), 335-370. https://doi.org/10.1016/j.jacceco.2006.01.002
Santana, C. V. S., Santos, L. P. G. D., Carvalho, C. V. D. O., & Martinez, A. L. (2019). Sentimento do investidor e gerenciamento de resultados no Brasil. Revista Contabilidade & Finanças, 31, 283-301. https://doi.org/10.1590/1808-057x201909130
Santos, L. L. R. D. (2020). Habilidade gerencial e a relação da remuneração dos executivos com o gerenciamento de resultados (Master's thesis, Universidade Federal de Pernambuco).
Schuster, H. A., & Klann, R. C. (2019). Responsabilidade Social Corporativa e Gerenciamento de Resultados por Accruals. Contabilidade Vista & Revista, 30(1), 01-26. https://doi.org/10.22561/cvr.v30i1.4490
Sloan, R. G. (1996). Do stock prices fully reflect information in accruals and cash flows about future earnings? Accounting Review, 71(3), 289-315. https://www.jstor.org/stable/248290
Teixeira, E. A., Nossa, V., & Funchal, B. (2011). O índice de sustentabilidade empresarial (ISE) e os impactos no endividamento e na percepção de risco. Revista Contabilidade & Finanças, 22, 29-44. https://doi.org/10.1590/S1519-70772011000100003
Wang, Z., Chen, M. H., Chin, C. L., & Zheng, Q. (2017). Managerial ability, political connections, and fraudulent financial reporting in China. Journal of Accounting and Public Policy, 36(2), 141-162. https://doi.org/10.1016/j.jaccpubpol.2017.02.004
Watts, R. L., & Zimmerman, J. L. (1978). Towards a positive theory of the determination of accounting standards. Accounting Review, 112-134. https://www.jstor.org/stable/245729
Yang, H. I. (2012). Capital market consequences of managers' voluntary disclosure styles. Journal of Accounting and Economics, 53(1-2), 167-184. https://doi.org/10.1016/j.jacceco.2011.08.003
Published
How to Cite
Issue
Section
License
Os Direitos Autorais para artigos publicados neste periódico são do autor, com direitos de primeira publicação para a Revista. Em virtude de aparecerem nesta Revista de acesso público, os artigos são de uso gratuito, com atribuições próprias, em aplicações educacionais, de exercício profissional e para gestão pública. A Revista adotou a licença Creative Commons Atribuição 4.0 Internacional - CC BY NC ND. Esta licença permite acessar, baixar (download), copiar, imprimir, compartilhar, reutilizar e distribuir os artigos desde que com a citação da fonte, atribuindo os devidos créditos de autoria. Nesses casos, nenhuma permissão é necessária por parte dos autores ou dos editores. Autores têm autorização para assumir contratos adicionais separadamente, para distribuição não-exclusiva da versão do trabalho publicada nesta revista (ex.: publicar em repositório institucional ou um capítulo de livro).
Esta obra está licenciada sob uma Licença Creative Commons.
