EARNINGS MANAGEMENT AND ISLAM

2013

This paper examines whether executives in Islamic banking institutions (IBIs) are more likely to use efficient earnings management (EM) or opportunistic EM. A sample of 81 Islamic banks in a 10 year financial period from 2000 to 2009 has been analyzed and fixed effect regression method is applied. We found a positive and significant relationship between EM proxy and future profitability, which means that EM tends toward efficient. This indicates that Islamic banks executives do not use their discretion to opportunistically manipulate their earnings. But they use their discretion to communicate inside information about IBIs profitability.Furthermore, this paper provides indirect evidence that Islamic ethical standards affect the likelihood of unethical opportunistic EM. Islamic ethics, it is established, prohibit such managerial behaviour as it violates the Islamic ethical axioms.

2017

This study aims to understand the nature impact of earnings management practice on the quality of accounting information in Jordan.The study used the quantitative technique to gather the data by using a questionnaire to understand the users' attitudes about earnings management practice in Jordan and how this practice influences the quality of accounting information. To discover this issue, the researcher documented several criteria to identify the concept of "earning management'' and define the variables to measure it. The study states that all accounting information users believe that the earnings management practice is used by some companies in Jordan. They stated how the practice affects the quality of accounting information by detecting a significant effect of earnings management, which in turn has an impact on users' decisions, such as investors, financial analysts, and creditors. In addition, the study's outcome specified that earnings management has an important influence on accounting information quality. Most companies resort to using earnings management techniques to meet shareholders' wants, financial analysts' expectations for the company's performance, or management's desire to increase the net income which in turn increases the rewards they receive or to achieve their personal interests that resulted from agency problems. Finally, earnings management is considered a form of accounting manipulation practiced without breaching laws and standards.The consequences of the current study help users of financial reports, such as managers and investors, detect an effect of earning management on users' decision making.It is believed that there is no Jordanian study to date examining the impact of earnings management on the quality of accounting information. Therefore, this study significantly contributes to the limited literature on the exploitation of the earnings management concept to influence the quality of accounting information in developing countries.The difficulty with using a questionnaire in developing countries, such as Jordan, also there are a number of users who do not care about the results of the study Keywords: Earnings management, real activity manipulation, accrual manipulation, consequences of earnings management, quality of accounting information, reasons for earnings management applications.

Journal of Middle Eastern and Islamic Studies (in Asia), 2012

There is growing concern among the users of financial statements about the level of frauds occurring in the business organization. The unexpected collapse of corporate giants such as Enron and WorldCom has driven those interested to pay more attention to the unethical practices in accounting systems. The phenomenon of Earnings Management (EM) is seen as one of the most problematic issues facing the accounting profession during the last few decades. It has been argued that EM misleads the users of financial statements. This is because when the managers alter earnings, the financial statements do not accurately reflect the economic wealth of the company, which ultimately leads to the gross

Accounting, 2021

Continuous improvement of accounting policies coincides with the increase and development of earnings management. Several studies focus on this topic, and it became subject to many investigations. This paper deals with current literature focused on several axes of earnings management like motives for practicing earnings management, earnings management types, developed models to discover earnings management, factors affecting earnings management, and the consequences of earnings management practices. Besides, this research focuses on earnings management in Saudi Arabia in particular. In the recent period, Saudi Arabia is going through changes in the Saudi economy and changes in accounting systems, such as adopting the IFRS standards, which provides opportunities for expanding research into earnings management in the Saudi Arabia context. Several studies conclude that Saudi companies' earnings management practices are done in several ways and affected by many factors.

Haya: The Saudi Journal of Life Sciences

This article provides the conceptual framework for earnings management, which begins by presenting the concept of earnings management, then the actions, motives, techniques, measurement, and then the consequences of this practice. This article also presented studies that dealt with earnings management in the Saudi context. This is because the Kingdom of Saudi Arabia has recently witnessed a clear development in companies and changes in accounting systems which in turn provides an opportunity for more research on earnings management in Saudi Arabia. Several studies provide evidence that EM occurs in Saudi companies, and there are many motivations to practice earnings management in Saudi companies.

Journal of Islamic Economics and Philanthropy, 2018

J o u r n a l o f I s l a m i c E c o n o m i c s a n d P h i l a n t h r o p y reports. In generally, earning management occurs when managers choose reporting methods and estimates that do not accurately reflect their firms underlying economics. 5 Earning management becomes a complicated issue but many go public companies have applied it. Some examples of earning management are Toshiba Corporation 6 that amounted the earning to 151.8 billion yen or around Rp 15.85 trillion since year 2008, 7 resulting in the company being required compensation amounted to 16.7 billion yen or equivalent 162.3 million u.s. dollars due to losses they suffered. 8 Another example is the pharmaceutical corporations which are State-owned PT Indofarma (Persero) Tbk., 9 which suffered losses of up to Rp 17.

International Journal of Education Development, 2019

The main aim of this study is to provide an overview of earnings management. Earnings Management practices are prevalent in organizations recently and this is attributed to bad corporate governance. Accountants and Managers apply strategies that heighten earnings management in the financial reporting process by using profit eroding mechanisms which lead to drastic consequences (corporate collapse both internationally and locally as in the cases of WorldCom and Enron as well as African Petroleum Plc and Cadbury Nigeria Plc). Thus, corroding public (investors) confidence and reducing the quality of the financial reports which eventually brings adverse effects on resource allocation in the economy. Hence, investors, regulators, and academics are concerned about the continuous financial reporting abuses. This paper explored literatures on earnings management and showed the techniques used by managers to manipulate earnings in various organizations. This study suggests that a supervisory authorities be put in place by appropriately enforcing framework needed to exert compliance by firms in the preparation and presentation of financial statements. Also, the accounting profession should strengthen its ethical code so that the individual accountants and auditors will be less willing to connive and engage in the practice of earnings management.

Journal of Advanced Social Research, 2013

Earnings are the powerful indicators of the firms’ business activities. Since a company’s stock is measured by the present value of its future earnings, investors and analysts look to earnings to determine the attractiveness of a particular stock. Companies with poor earnings prospects will typically have lower share prices than those with good prospects. So, Earnings management plays a key role to determine the share price of a company as well as direct resource allocation in capital market. This paper specially focuses on earnings management, quality of earnings and various techniques (like cookie jar reserve, big bath, and big bet) that are used to manage earnings in the business entity. Extent and type of earnings management depends on several factors like stock market incentives, personal incentives, political & regulatory motives. Finally, this paper concludes that rigorous accounting standard, awareness of audit committee, corporate governance and consciousness and the morali...

New Applied Studies in Management, Economics & Accounting, 2023

This research aims to determine and analyze earnings management practices by companies by using the Jones Model to calculate discretionary accruals that proxy earnings management. The research was conducted at PROPER companies listed on the Indonesia stock exchange from 2017 to 2021. This research will be a descriptive study with a quantitative approach which is a differentiator from other research that tends to conduct associative research, so this research can explore the earnings management practices carried out more intensely. The research result reveal that all PROPER companies are indicated to practice earnings management and are dominated by companies that have made environmental management efforts required following the provisions. This research can be a consideration for stakeholders in making decisions.

Media Bisnis, 2021

The purpose of this research is to obtain empirical evidence about the influence of return on asset, financial leverage, firm size, firm age, fixed asset turnover, free cash flow, sales growth, audit quality, managerial ownership, institutional ownership, board size, and audit committee on earnings management. The population used in this research are non financial companies listed in Indonesia Stock Exchange from 2017 to 2019. The sample used for this research consists of 195 listed non-financial companies. The sampling technique used purposive sampling method, tested and analyzed using multiple regression method. The result of this research shows that return on asset, financial leverage, sales growth, and audit committee has positive influence while fixed asset turnover and free cash flow has negative influence on earnings management, moreover the other independent variables such as firm size, firm age, audit quality, managerial ownership, institutional ownership, and board size have no influence on earnings management.