SHS Web Conf.
Volume 129, 2021The 21st International Scientific Conference Globalization and its Socio-Economic Consequences 2021
|Number of page(s)||11|
|Section||Financial Management and Financial Markets|
|Published online||16 December 2021|
Does the corporate life cycle affect earnings management? Evidence from Central European countries
Department of Economics, Faculty of Operation and Economics of Transport and Communications, University of Zilina, Univerzitna 1, 010 26 Zilina, Slovakia
* Corresponding author: email@example.com
Research background: Earnings manipulations are a global phenomenon, the aim of which is not only to improve the financial position in accordance with Positive Accounting Theory, but also other goals of the company in accordance with the management strategy. However, the diversity of the company’s goals along with the corporate life cycle are crucial factors influencing the quality of corporate earnings and the existence, scope and application of downward and upward earnings management.
Purpose of the article: The aim of the paper is to comprehensively analyse and verify the existence and extent of downward and upward earnings management in Central European countries with an emphasis on differences between countries and between life cycle stages.
Methods: The study uses Mann-Whitney test and binomial test to verify the existence and extent of downward and upward earnings management. The sample covers discretionary accruals for 2019 estimated by modified Jones and Teoh, et al. models from almost 3,500 companies from four Central European countries.
Findings & Value added: The results show that, depending on the life cycle stage or country, companies manipulate profits, but the application of a specific type of earnings management and its scope vary significantly within countries and life cycle stages. Lifecycle manipulation earnings are U-shaped, meaning that start-ups and declining companies use, on average, more significant upward earnings management. On the contrary, mature companies reduce their accounting profit. Nevertheless, the share of companies using upward earnings management is higher than companies with downward earnings management.
Key words: corporate life cycle; / discretionary accruals; / emerging economies; / earnings management
© The Authors, published by EDP Sciences, 2021
This is an Open Access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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