Search results for: earnings patterns
Commenced in January 2007
Frequency: Monthly
Edition: International
Paper Count: 2779

Search results for: earnings patterns

2749 The Effects of Changes in Accounting Standards on Loan Loss Provisions (LLP) as Earnings Management Device: Evidence from Malaysia and Nigeria Banks (Part I)

Authors: Ugbede Onalo, Mohd Lizam, Ahmad Kaseri

Abstract:

In view of dearth of studies on changes in accounting standards and banks’ earnings management particularly in the context of emerging economies, and the recent Malaysia and Nigeria change from their respective local GAAP to IFRS, this study deemed it overwhelming to investigate the effects of the switch on banks’ earnings management focusing on LLP as the manipulative device. This study employed judgmental sampling to select twenty eight banks- eight Malaysia and twenty Nigeria banks as sample covering period 2008-2013. To provide an empirical research setting in pursuant of the objective of this study, the study period is further partitioned into pre (2008, 2009, 2010) and post (2011, 2012, 2013) IFRS adoption periods. This study consistent with previous studies models a LLP regression model to investigate specific discretionary accruals of banks. Findings suggest that Malaysia and Nigeria banks individually use LLP to manage reported earnings more prior to IFRS implementation. Comparative overall results evidenced that the pre IFRS adoption or domestic GAAP era for both Malaysia and Nigeria sample banks is associated with higher prevalent earnings management through LLP than the corresponding post IFRS adoption era in diverse magnitude but in favour of Malaysia banks for both periods. With results demonstrating that IFRS adoption is linked to lower earnings management via LLP, this study therefore recommends the global adoption of IFRS as reporting framework. This study also endorses that Nigeria banks embrace and borrow a leaf from Malaysia banks good corporate governance practices.

Keywords: accounting standards, IFRS, FRS, SAS, LLP, earnings management

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2748 The Misuse of Free Cash and Earnings Management: An Analysis of the Extent to Which Board Tenure Mitigates Earnings Management

Authors: Michael McCann

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Managerial theories propose that, in joint stock companies, executives may be tempted to waste excess free cash on unprofitable projects to keep control of resources. In order to conceal their projects' poor performance, they may seek to engage in earnings management. On the one hand, managers may manipulate earnings upwards in order to post ‘good’ performances and safeguard their position. On the other, since managers pursuit of unrewarding investments are likely to lead to low long-term profitability, managers will use negative accruals to reduce current year’s earnings, smoothing earnings over time in order to conceal the negative effects. Agency models argue that boards of directors are delegated by shareholders to ensure that companies are governed properly. Part of that responsibility is ensuring the reliability of financial information. Analyses of the impact of board characteristics, particularly board independence on the misuse of free cash flow and earnings management finds conflicting evidence. However, existing characterizations of board independence do not account for such directors gaining firm-specific knowledge over time, influencing their monitoring ability. Further, there is little analysis of the influence of the relative experience of independent directors and executives on decisions surrounding the use of free cash. This paper contributes to this literature regarding the heterogeneous characteristics of boards by investigating the influence of independent director tenure on earnings management and the relative tenures of independent directors and Chief Executives. A balanced panel dataset comprising 51 companies across 11 annual periods from 2005 to 2015 is used for the analysis. In each annual period, firms were classified as conducting earnings management if they had discretionary accruals in the bottom quartile (downwards) and top quartile (upwards) of the distributed values for the sample. Logistical regressions were conducted to determine the marginal impact of independent board tenure and a number of control variables on the probability of conducting earnings management. The findings indicate that both absolute and relative measures of board independence and experience do not have a significant impact on the likelihood of earnings management. It is the level of free cash flow which is the major influence on the probability of earnings management. Higher free cash flow increases the probability of earnings management significantly. The research also investigates whether board monitoring of earnings management is contingent on the level of free cash flow. However, the results suggest that board monitoring is not amplified when free cash flow is higher. This suggests that the extent of earnings management in companies is determined by a range of company, industry and situation-specific factors.

Keywords: corporate governance, boards of directors, agency theory, earnings management

Procedia PDF Downloads 189
2747 Modeling the Relation between Discretionary Accrual Earnings Management, International Financial Reporting Standards and Corporate Governance

Authors: Ikechukwu Ndu

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This study examines the econometric modeling of the relation between discretionary accrual earnings management, International Financial Reporting Standards (IFRS), and certain corporate governance factors with regard to listed Nigerian non-financial firms. Although discretionary accrual earnings management is a well-known and global problem that has an adverse impact on users of the financial statements, its relationship with IFRS and corporate governance is neither adequately researched nor properly systematically investigated in Nigeria. The dearth of research in the relation between discretionary accrual earnings management, IFRS and corporate governance in Nigeria has made it difficult for academics, practitioners, government setting bodies, regulators and international bodies to achieve a clearer understanding of how discretionary accrual earnings management relates to IFRS and certain corporate governance characteristics. This is the first study to the author’s best knowledge to date that makes interesting research contributions that significantly add to the literature of discretionary accrual earnings management and its relation with corporate governance and IFRS pertaining to the Nigerian context. A comprehensive review is undertaken of the literature of discretionary total accrual earnings management, IFRS, and certain corporate governance characteristics as well as the data, models, methodologies, and different estimators used in the study. Secondary financial statement, IFRS, and corporate governance data are sourced from Bloomberg database and published financial statements of Nigerian non-financial firms for the period 2004 to 2016. The methodology uses both the total and working capital accrual basis. This study has a number of interesting preliminary findings. First, there is a negative relationship between the level of discretionary accrual earnings management and the adoption of IFRS. However, this relationship does not appear to be statistically significant. Second, there is a significant negative relationship between the size of the board of directors and discretionary accrual earnings management. Third, CEO Separation of roles does not constrain earnings management, indicating the need to preserve relationships, personal connections, and maintain bonded friendships between the CEO, Chairman, and executive directors. Fourth, there is a significant negative relationship between discretionary accrual earnings management and the use of a Big Four firm as an auditor. Fifth, including shareholders in the audit committee, leads to a reduction in discretionary accrual earnings management. Sixth, the debt and return on assets (ROA) variables are significant and positively related to discretionary accrual earnings management. Finally, the company size variable indicated by the log of assets is surprisingly not found to be statistically significant and indicates that all Nigerian companies irrespective of size engage in discretionary accrual management. In conclusion, this study provides key insights that enable a better understanding of the relationship between discretionary accrual earnings management, IFRS, and corporate governance in the Nigerian context. It is expected that the results of this study will be of interest to academics, practitioners, regulators, governments, international bodies and other parties involved in policy setting and economic development in areas of financial reporting, securities regulation, accounting harmonization, and corporate governance.

Keywords: discretionary accrual earnings management, earnings manipulation, IFRS, corporate governance

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2746 Asymmetric Relation between Earnings and Returns

Authors: Seungmin Chee

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This paper investigates which of the two arguments, conservatism or liquidation option, is a true underlying driver of the asymmetric slope coefficient result regarding the association between earnings and returns. The analysis of the relation between earnings and returns in four mutually exclusive settings segmented by ‘profits vs. losses’ and ‘positive returns vs. negative returns’ suggests that liquidation option rather than conservatism is likely to cause the asymmetric slope coefficient result. Furthermore, this paper documents the temporal changes between Basu period (1963-1990) and post-Basu period (1990-2005). Although no significant change in degree of conservatism or value relevance of losses is reported, stronger negative relation between losses and positive returns is observed in the post-Basu period. Separate regression analysis of each quintile based on the rankings of price to sales ratio and book to market ratio suggests that the strong negative relation is driven by growth firms.

Keywords: conservatism, earnings, liquidation option, returns

Procedia PDF Downloads 337
2745 Accounting Quality and The Adoption of IFRS: Evidence from China

Authors: Khaldoon G. Albitar, Hassan Y. Kikhia, Jin P. Zhang

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Since 2007, all companies listed on both Shanghai Stock Exchange and Shenzhen Stock Exchange are required to prepare their consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). This study investigates the impact of adopting IFRS on accounting quality for a sample of listed on Chinese companies during the period 2003-2013 with sample of 10846 observations over a four-year period before and a five-year period after the adoption of IFRS. This study tests whether the level of earnings management is significantly lower after the adoption of IFRS, and reported earnings is more value relevant during the IFRS period by using the Ohlson model and Jones model, as modified by Dechow. The empirical results show that accounting quality improved with lower earnings management and higher value relevant after the adoption of IFRS in China. The current study contributes to the literature on IFRS adoption and earning quality in two ways. First, As most of the existing studies on earnings quality and IFRS have been conducted on data from the U.S and European countries, this study fills a gap in the existing literature by studying the effect of adoption of IFRS on earnings quality in an emerging market. Second, the findings of our study have important implications for policymakers, auditors, multinational firms, and users of financial reports. As the rapid growth of China's economy gains global recognition, the Chinese stock market is capturing the attention of international investor.

Keywords: international financial reporting standards (ifrs), accounting quality, earnings management, value relevance, china

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2744 Financial Reports and Common Ownership: An Analysis of the Mechanisms Common Owners Use to Induce Anti-Competitive Behavior

Authors: Kevin Smith

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Publicly traded company in the US are legally obligated to host earnings calls that discuss their most recent financial reports. During these calls, investors are able to ask these companies questions about these financial reports and on the future direction of the company. This paper examines whether common institutional owners use these calls as a way to indirectly signal to companies in their portfolio to not take actions that could hurt the common owner's interests. This paper uses transcripts taken from the earnings calls of the six largest health insurance companies in the US from 2014 to 2019. This data is analyzed using text analysis and sentiment analysis to look for patterns in the statements made by common owners. The analysis found that common owners where more likely to recommend against direct price competition and instead redirect the insurance companies towards more passive actions, like investing in new technologies. This result indicates a mechanism that common owners use to reduce competition in the health insurance market.

Keywords: common ownership, text analysis, sentiment analysis, machine learning

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2743 A Comparison of Ethical Perceptions of Business Students In MINA

Authors: Leonie Jooste

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The main purpose of this article is to explore the ethical values of accounting students at Universities and Business Managers. Financial fraud (earnings management) is continuing to exist and published in literature and social media. However, irrespective of extensive publication, and academic research, financial fraud is still happening or still being committed. The student of today may be the manager in the future. In a study by Bruns and Merchant, the authors found that the morality of short-term earnings management was of little concern to researchers and accounting practitioners. However, in the light of increased financial frauds and failures, new and increased emphasis has been placed on the importance of the concepts of earnings quality, earnings management practices, and the inclusion of business ethics in accounting syllabi. This study uses a quantitative analysis related to the Bruns and Merchant survey of accounting students. 59 accounting students in the MENA area were surveyed in 2022 to measure their ethical values regarding earning management practices in organisations. The results of this survey were compared the surveys in 2013 to determine if courses in business ethics offered at the university influenced the perceptions of students on unethical behaviour in business practices. For the data analysis, the mean values and significant differences were calculated and compared. Overall, the results showed that there was hardly any significant difference between the two surveys.

Keywords: ethics, earnings management, corporate social responsibility, business courses.

Procedia PDF Downloads 84
2742 Does Operating Cash Flow Really Matter in Value Relevance? A Recent Empirical Analysis on the Largest European Companies

Authors: Francesco Paolone

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This paper investigates the role of Operating Cash Flow (OCF) and accruals in firm valuation analyzing financial statement information from the largest European companies and evaluating their relation to firm market value. Using a dataset of 500 largest European companies in 2018, the study investigates the relative value-relevance of equity, net income and operating cash flow (OCF). Findings show that the cash flow measure has the same explanatory power and intensity as equity and earnings to explain the market value. This study contributes to the debate on the value relevance of OCF incremental to book value and earnings. It also extends the literature, showing that OCF has information content (value relevance) superior to earnings and book value in the main European markets (Bepari et al., 2013). Finally, the study provides a support that accounting method choice may confuse investors, who have reduced confidence in accounting earnings and book value; in other words, nowadays European investors rely more on cash flows instead of accruals numbers.

Keywords: Cash Flow Statement, Value Relevance, Accounting, Financial Statement Analysis

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2741 Dividends Smoothing in an Era of Unclaimed Dividends: A Panel Data Analysis in Nigeria

Authors: Apedzan Emmanuel Kighir

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This research investigates dividends smoothing among non-financial companies trading on the Nigerian Stock Exchange in an era of unclaimed dividends from 2004 to 2013. There has been a raging controversy among Regulatory Authorities, Company Executives, Registrars of Companies, Shareholders and the general public regarding the increasing incidence of unclaimed dividends in Nigeria. The objective of this study is to find out if corporate earnings management through dividends smoothing is implicated in unclaimed dividends among Nigerian non-financial firms. The research used panel data and employed Generalized Method of Moment as method of analysis. The research finds evidence of dividends-smoothing in this era of unclaimed dividends in Nigeria. The research concludes that dividends-smoothing is a trigger and red flag for unclaimed dividends, an output of earnings management. If earnings management and hence unclaimed dividends in Nigeria is allowed to continue, it will lead to great consequences to the investors and corporate policy of government. It is believed that the research will assist investors and government in making informed decisions regarding dividends policy in Nigeria.

Keywords: dividends smoothing, non financial companies, Nigerian stock exchange, unclaimed dividends, corporate earnings management

Procedia PDF Downloads 241
2740 Comparative Analysis of Islamic Bank in Indonesia and Malaysia with Risk Profile, Good Corporate Governance, Earnings, and Capital Method: Performance of Business Function and Social Function Perspective

Authors: Achsania Hendratmi, Nisful Laila, Fatin Fadhilah Hasib, Puji Sucia Sukmaningrum

Abstract:

This study aims to compare and see the differences between Islamic bank in Indonesia and Islamic bank in Malaysia using RGEC method (Risk Profile, Good Corporate Governance, Earnings, and Capital). This study examines the comparison in business and social performance of eleven Islamic banks in Indonesia and fifteen Islamic banks in Malaysia. This research used quantitative approach and the collections of data was done by collecting all the annual reports of banks that has been created as a sample over the period 2011-2015. The test result of the Independent Samples T-test and Mann-Whitney Test showed there were differences in the business performance of Islamic Bank in Indonesia and Malaysia as seen from the aspect of Risk profile (FDR), GCG, and Earnings (ROA). Also, there were differences of business and social performance as seen from Earnings (ROE), Capital (CAR), and Sharia Conformity Indicator (PSR and ZR) aspects.

Keywords: business performance, Islamic banks, RGEC, social performance

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2739 The Impact of Financial News and Press Freedom on Abnormal Returns around Earnings Announcements in Greater China

Authors: Yu-Chen Wei, Yang-Cheng Lu, I-Chi Lin

Abstract:

This study examines the impacts of news sentiment and press freedom on abnormal returns during the earnings announcement in greater China including the Shanghai, Shenzhen and Taiwan stock markets. The news sentiment ratio is calculated by using the content analysis of semantic orientation. The empirical results show that news released prior to the event date may decrease the cumulative abnormal returns prior to the earnings announcement regardless of whether it is released in China or Taiwan. By contrast, companies with optimistic financial news may increase the cumulative abnormal returns during the announcement date. Furthermore, the difference in terms of press freedom is considered in greater China to compare the impact of press freedom on abnormal returns. The findings show that, the freer the press is, the more negatively significant will be the impact of news on the abnormal returns, which means that the press freedom may decrease the ability of the news to impact the abnormal returns. The intuition is that investors may receive alternative news related to each company in the market with greater press freedom, which proves the efficiency of the market and reduces the possible excess returns.

Keywords: news, press freedom, Greater China, earnings announcement, abnormal returns

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2738 The Moderation Effect of Financial Distress on the Relationship Between Market Power and Earnings Management of Firms

Authors: Shazia Ali, Yves Mard, Éric Severin

Abstract:

To the best of our knowledge, this is the first study to have analyzed the impact of a) firm-specific product-market power and b) industry competition on earnings management behavior of European firms in distress versus healthy years while controlling for firm-level characteristics. We predicted a significant relationship between firms’ product market power and earnings management tools and their trade-off under the moderation effect of financial distress. We found that the firm-level market power hereinafter referred to as MP (proxied by the industry-adjusted Lerner Index) is positively associated with both real and accrual earnings management. However, MP is associated with a higher level of real earnings management compared to accrual earnings management in distress years compared to healthy years. On the other hand, industry product market power (representing low competition and proxied by the inverse of the total number of firms in an industry hereinafter referred to as NUMB) and firms product market power (proxied by firm market share hereinafter referred to as MS) are associated with lower inflationary accruals and higher deflationary accruals respectively. On the other hand, they are found to be linked with higher real earnings management in distress versus healthy years. When we divided the sample into small and big firms based on their respective industry-year median total assets, we found that all three measures of industry competition (Industry Median Lerner Index (hereinafter referred to as IMLI), NUMB, and Herfindahl–Hirschman Index (hereinafter referred to as HHI) indicate that small firms in low-competitive industries in financial distress are more likely to inflate their earnings through discretionary accruals. While big firms in this situation are more likely to lower the use of both inflationary and deflationary discretionary accruals as indicated by IMLI and HHI and trade-off accruals earnings management for real earnings management as indicated by NUMB. Moreover, IMLI and HHI did not show any interesting results when we divided the sample based on the firm Lerner Index/Market Power. However, the distressed firms with high market power (MP>industry median) are found to engage in income-decreasing discretionary accruals in low-competitive industries (high NUMB). Whereas firms with low market power in the same industry use downward discretionary accruals but inflate income using real activities (abnCFO). Our findings are robust across alternate measures of discretionary accruals and financial distress, such as the Altman Z-Score. The finding of the study is valuable for accounting standard setters, competition authorities, policymakers, and investors alike to help in informed decision-making.

Keywords: financial distress, earnings management, market competition

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2737 Impact of Audit Committee on Real Earnings Management: Cases of Netherlands

Authors: Sana Masmoudi Mardassi, Yosra Makni Fourati

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Regulators highlight the importance of the Audit Committee (AC) as a key internal corporate governance mechanism. One of the most important roles of this committee is to oversee the financial reporting process. The purpose of this paper is to examine the link between the characteristics of an audit committee and the financial reporting quality by investigating whether the characteristics of audit committees are associated with improved financial reporting quality, especially the Real Earnings Management. In the current study, a panel data from 80 nonfinancial companies listed on the Amsterdam Stock Exchange during the period between 2010 and 2017 were used. To measure audit committee characteristics, four proxies have been used, specifically, audit committee independence, financial expertise, gender diversity and AC meetings. For this research, a linear regression model was used to identify the influence of a set of board characteristics of the audit committee on real earnings management after controlling for firm audit committee size, leverage, size, loss, growth and board size. This research provides empirical evidence of the association between audit committee independence, financial expertise, gender diversity and meetings and Real Earnings Management (REM) as a proxy of financial reporting quality. The study finds that independence and AC Gender diversity are strongly related to financial reporting quality. In fact, these two characteristics constrain REM. The results also suggest that AC- financial expertise reduces to some extent, the likelihood of engaging in REM. These conclusions provide support then to the audit committee requirement under the Dutch Corporate Governance Code rules regarding gender diversity and AC meetings.

Keywords: audit committee, financial expertise, independence, real earnings management

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2736 Pre and Post IFRS Loss Avoidance in France and the United Kingdom

Authors: T. Miková

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This paper analyzes the effect of a single uniform accounting rule on reporting quality by investigating the influence of IFRS on earnings management. This paper examines whether earnings management is reduced after IFRS adoption through the use of “loss avoidance thresholds”, a method that has been verified in earlier studies. This paper concentrates on two European countries: one that represents the continental code law tradition with weak protection of investors (France) and one that represents the Anglo-American common law tradition, which typically implies a strong enforcement system (the United Kingdom). The research investigates a sample of 526 companies (6822 firm-year observations) during the years 2000 – 2013. The results are different for the two jurisdictions. This study demonstrates that a single set of accounting standards contributes to better reporting quality and reduces the pervasiveness of earnings management in France. In contrast, there is no evidence that a reduction in earnings management followed the implementation of IFRS in the United Kingdom. Due to the fact that IFRS benefit France but not the United Kingdom, other political and economic factors, such legal system or capital market strength, must play a significant role in influencing the comparability and transparency cross-border companies’ financial statements. Overall, the result suggests that IFRS moderately contribute to the accounting quality of reported financial statements and bring benefit for stakeholders, though the role played by other economic factors cannot be discounted.

Keywords: accounting standards, earnings management, international financial reporting standards, loss avoidance, reporting quality

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2735 Adoption of International Financial Reporting Standards and Earnings Quality in Listed Deposit Money Banks in Nigeria

Authors: Shehu Usman Hassan

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Published accounting information in financial statements are required to provide various users - shareholders, employees, suppliers, creditors, financial analysts, stockbrokers and government agencies – with timely and reliable information useful for making prudent, effective and efficient decisions. The widespread failure in the financial information quality has created the need to improve the financial information quality and to strengthen the control of managers by setting up good firms structures. This paper investigates firm attributes from perspective of structure, monitoring, performance elements of listed deposit money banks in Nigeria. The study adopted correlational research design with balanced panel data of 14 banks as sample of the study using multiple regression as a tool of analysis. The result reveals that firms attributes (leverage, profitability, liquidity, bank size and bank growth) has as significant influence on earnings quality of listed deposit money banks in Nigeria after the adoption of IFRS, while the pre period shows that the selected firm attributes has no significant impact on earnings quality. It is therefore concluded that the adoption of IFRS is right and timely.

Keywords: earnings quality, firm attributes, listed deposit money bank, Nigeria

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2734 Alignment in Earnings Management Research: Italy Looking towards US

Authors: Giulia Leoni, Cristina Florio

Abstract:

The paper aims to investigate the factors driving the increasing alignment of Italian earnings management (EM) research to US research on the same field. After characterizing the progressive similarity of Italian EM research with respect to US one by means of an historical comparison, the paper relies on a subsequent secondary source analysis to detect the possible causes of said alignment. Once identified that the alignment increased along three subsequent periods, the paper analyses and discusses this incremental similarity according to new institutional sociology (NIS) and highlights the presence of different combination of isomorphic pressures that help explaining this incremental similarity. The paper contributes to the institutional literature by providing evidence of isomorphism in academic research; it also contributes to accounting research by indicating the forces that are able to drive change and development in accounting research at national and international level. The paper also enlarges the explanatory value of NIS in alternative contexts, like academic accounting research.

Keywords: accounting research, earnings management, international comparison, Italy, new institutional sociology, US

Procedia PDF Downloads 537
2733 A Systematic Literature Review on Security and Privacy Design Patterns

Authors: Ebtehal Aljedaani, Maha Aljohani

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Privacy and security patterns are both important for developing software that protects users' data and privacy. Privacy patterns are designed to address common privacy problems, such as unauthorized data collection and disclosure. Security patterns are designed to protect software from attack and ensure reliability and trustworthiness. Using privacy and security patterns, software engineers can implement security and privacy by design principles, which means that security and privacy are considered throughout the software development process. These patterns are available to translate "security & privacy-by-design" into practical advice for software engineering. Previous research on privacy and security patterns has typically focused on one category of patterns at a time. This paper aims to bridge this gap by merging the two categories and identifying their similarities and differences. To do this, the authors conducted a systematic literature review of 25 research papers on privacy and security patterns. The papers were analysed based on the category of the pattern, the classification of the pattern, and the security requirements that the pattern addresses. This paper presents the results of a comprehensive review of privacy and security design patterns. The review is intended to help future IT designers understand the relationship between the two types of patterns and how to use them to design secure and privacy-preserving software. The paper provides a clear classification of privacy and security design patterns, along with examples of each type. The authors found that there is only one widely accepted classification of privacy design patterns, while there are several competing classifications of security design patterns. Three types of security design patterns were found to be the most commonly used.

Keywords: design patterns, security, privacy, classification of patterns, security patterns, privacy patterns

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2732 International Financial Reporting Standard Adoption and Value Relevance of Earnings in Listed Consumer Goods Companies in Nigerian

Authors: Muktar Haruna

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This research work examines the International Financial Reporting Standard (IFRS) adoption and value relevance of earnings of listed consumer goods companies in the Nigerian. The population of the study comprises 22 listed consumer goods companies, out of which 15 were selected as sample size of the study. The scope of the study is a 12-year period covering from 2006 to 2018. Secondary data from the annual report of sampled companies were used, which consists of earnings per share (EPS), the book value of equity per share (BVE) as independent variables; firm size (FSZ) as a control variable, and market share price of sampled companies from Nigerian stock exchange as dependent variable. Multiple regressions were used to analyze the data. The results of the study showed that IFRS did not improve the value relevance of earnings after the adoption, which translates to a decrease in value relevance of accounting numbers in the post-adoption period. The major recommendation is that the Nigerian Reporting Council should ensure full compliance to all provisions of IFRS and provide uniformity in the presentation of non-current assets in the statement of financial position, where some present only net current assets leaving individual figures for current assets and liabilities invisible.

Keywords: IFRS, adoption, value relevance, earning per share, book value of equity per share

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2731 Evaluation of Key Performance Indicators as Determinants of Dividend Paid on Ordinary Shares in Nigeria Banking Sector

Authors: Oliver Ikechukwu Inyiama, Boniface Uche Ugwuanyi

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The aim of the research is to evaluate the key financial performance indicators that help both managers and their shareholders of Nigerian Banks to determine the appropriate dividend payout to their ordinary shareholders in an accounting year. Profitability, total asset, and earnings of commercial banks were selected as key performance indicators in Nigeria Banking Sector. They represent the independent variables of the study while dividend per share is the proxy for the dividend paid on ordinary shares which represent the dependent variable. The effect of profitability, total asset and earnings on dividend per share were evaluated through the ordinary least square method of multiple regression analysis. Test for normality of frequency distribution was conducted through descriptive statistics such as Jacque Bera Statistic, skewness and kurtosis. Rate of dividend payout was subsequently applied as an alternate dependent variable to test for robustness of the earlier results. The 64% adjusted R-squared of the pooled data indicates that profitability, total asset, and earnings explain the variation in dividend per share during the period under research while the remaining 36% variation in dividend per share could be explained by changes in other variables not captured by this study as well as the error term. The study concentrated on four leading Nigeria Commercial Banks namely; First Bank of Nigeria Plc, GTBank Plc, United Bank for Africa Plc and Zenith International Bank Plc. Dividend per share was found to be positively affected by total assets and earnings of the commercial banks. However, profitability which was proxied by profit after tax had a negative effect on dividend per share. The implication of the findings is that commercial banks in Nigeria pay more dividend when they are having a dwindling fortune in order to retain the confidence of the shareholders provided their gross earnings and size is on the increase. Therefore, the management and board of directors of Nigeria commercial banks should apply decent marketing strategies to enhance earnings through investment in profitable ventures for an improved dividend payout rate.

Keywords: assets, banks, indicators, performance, profitability, shares

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2730 The Impact of Audit Committee on Real Earnings Management: Evidence from Netherlands

Authors: Sana Masmoudi, Yosra Makni

Abstract:

Regulators highlight the importance of the Audit Committee (AC) as a key internal corporate governance mechanism. One of the most important roles of this committee is to oversee the financial reporting process. The purpose of this paper is to examine the link between the characteristics of an audit committee and the financial reporting quality by investigating whether the formation of audit committees and their characteristics are associated with improved financial reporting quality. This study provides empirical evidence of the association between audit committee independence, financial expertise, gender diversity, and meetings and Real Earnings Management (REM) as a proxy of financial reporting quality. Using data from, with a sample of 80 companies listed on the Amsterdam Stock Exchange during 2010-2017, the study finds that independence and AC Gender diversity are strongly related to financial reporting quality. In fact, these two characteristics constrain REM. The results also suggest that AC-financial expertise reduces to some extent, the likelihood of engaging in REM. These conclusions provide support then to the audit committee requirement under the Dutch Corporate Governance Code rules regarding gender diversity and AC meetings.

Keywords: audit committee, financial expertise, independence, real earnings management

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2729 Corporate Governance Mechanisms, Whistle-Blowing Policy and Earnings Management Practices of Firms in Malaysia

Authors: Mujeeb Saif Mohsen Al-Absy, Ku Nor Izah Ku Ismail, Sitraselvi Chandren

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This study examines whether corporate governance (CG) mechanisms in firms that have a whistle-blowing policy (WHBLP) are more effective in constraining earnings management (EM), than those without. A sample of 288 Malaysian firms for the years 2013 to 2015, amounting to 864 firm-years were grouped into firms with and without WHBLP. Results show that for firms without WHBLP, the board chairman tenure would minimize EM activities. Meanwhile, for firms with WHBLP, board chairman independence, board chairman tenure, audit committee size, audit committee meeting and women in the audit committees are found to be associated with less EM activities. Further, it is found that ownership concentration and Big 4 auditing firms help to reduce EM activities in firms with WHBLP, while not in firms without WHBLP. Hence, functional and effective governance can be achieved by having a WHBLP, which is in line with agency and resource dependent theories. Therefore, this study suggests that firms should have a WHBLP in place, and policymakers should come up with enhanced criteria to strengthen the mechanisms of WHBLP.

Keywords: corporate governance, earnings management, whistle-blowing policy, audit committee, board of directors

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2728 Digital Development of Cultural Heritage: Construction of Traditional Chinese Pattern Database

Authors: Shaojian Li

Abstract:

The traditional Chinese patterns, as an integral part of Chinese culture, possess unique values in history, culture, and art. However, with the passage of time and societal changes, many of these traditional patterns are at risk of being lost, damaged, or forgotten. To undertake the digital preservation and protection of these traditional patterns, this paper will collect and organize images of traditional Chinese patterns. It will provide exhaustive and comprehensive semantic annotations, creating a resource library of traditional Chinese pattern images. This will support the digital preservation and application of traditional Chinese patterns.

Keywords: digitization of cultural heritage, traditional Chinese patterns, digital humanities, database construction

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2727 Two-Sided Information Dissemination in Takeovers: Disclosure and Media

Authors: Eda Orhun

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Purpose: This paper analyzes a target firm’s decision to voluntarily disclose information during a takeover event and the effect of such disclosures on the outcome of the takeover. Such voluntary disclosures especially in the form of earnings forecasts made around takeover events may affect shareholders’ decisions about the target firm’s value and in return takeover result. This study aims to shed light on this question. Design/methodology/approach: The paper tries to understand the role of voluntary disclosures by target firms during a takeover event in the likelihood of takeover success both theoretically and empirically. A game-theoretical model is set up to analyze the voluntary disclosure decision of a target firm to inform the shareholders about its real worth. The empirical implication of model is tested by employing binary outcome models where the disclosure variable is obtained by identifying the target firms in the sample that provide positive news by issuing increasing management earnings forecasts. Findings: The model predicts that a voluntary disclosure of positive information by the target decreases the likelihood that the takeover succeeds. The empirical analysis confirms this prediction by showing that positive earnings forecasts by target firms during takeover events increase the probability of takeover failure. Overall, it is shown that information dissemination through voluntary disclosures by target firms is an important factor affecting takeover outcomes. Originality/Value: This study is the first to the author's knowledge that studies the impact of voluntary disclosures by the target firm during a takeover event on the likelihood of takeover success. The results contribute to information economics, corporate finance and M&As literatures.

Keywords: takeovers, target firm, voluntary disclosures, earnings forecasts, takeover success

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2726 An Analysis of Sequential Pattern Mining on Databases Using Approximate Sequential Patterns

Authors: J. Suneetha, Vijayalaxmi

Abstract:

Sequential Pattern Mining involves applying data mining methods to large data repositories to extract usage patterns. Sequential pattern mining methodologies used to analyze the data and identify patterns. The patterns have been used to implement efficient systems can recommend on previously observed patterns, in making predictions, improve usability of systems, detecting events, and in general help in making strategic product decisions. In this paper, identified performance of approximate sequential pattern mining defines as identifying patterns approximately shared with many sequences. Approximate sequential patterns can effectively summarize and represent the databases by identifying the underlying trends in the data. Conducting an extensive and systematic performance over synthetic and real data. The results demonstrate that ApproxMAP effective and scalable in mining large sequences databases with long patterns.

Keywords: multiple data, performance analysis, sequential pattern, sequence database scalability

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2725 International Financial Reporting Standards and the Quality of Banks Financial Statement Information: Evidence from an Emerging Market-Nigeria

Authors: Ugbede Onalo, Mohd Lizam, Ahmad Kaseri, Otache Innocent

Abstract:

Giving the paucity of studies on IFRS adoption and quality of banks accounting quality, particularly in emerging economies, this study is motivated to investigate whether the Nigeria decision to adopt IFRS beginning from 1 January 2012 is associated with high quality accounting measures. Consistent with prior literatures, this study measure quality of financial statement information using earnings measurement, timeliness of loss recognition and value relevance. A total of twenty Nigeria banks covering a period of six years (2008-2013) divided equally into three years each (2008, 2009, 2010) pre adoption period and (2011, 2012, 2013) post adoption period were investigated. Following prior studies eight models were in all employed to investigate earnings management, timeliness of loss recognition and value relevance of Nigeria bank accounting quality for the different reporting regimes. Results suggest that IFRS adoption is associated with minimal earnings management, timely recognition of losses and high value relevance of accounting information. Summarily, IFRS adoption engenders higher quality of banks financial statement information compared to local GAAP. Hence, this study recommends the global adoption of IFRS and that Nigeria banks should embrace good corporate governance practices.

Keywords: IFRS, SAS, quality of accounting information, earnings measurement, discretionary accruals, non-discretionary accruals, total accruals, Jones model, timeliness of loss recognition, value relevance

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2724 Irreducible Sign Patterns of Minimum Rank of 3 and Symmetric Sign Patterns That Allow Diagonalizability

Authors: Sriparna Bandopadhyay

Abstract:

It is known that irreducible sign patterns in general may not allow diagonalizability and in particular irreducible sign patterns with minimum rank greater than or equal to 4. It is also known that every irreducible sign pattern matrix with minimum rank of 2 allow diagonalizability with rank of 2 and the maximum rank of the sign pattern. In general sign patterns with minimum rank of 3 may not allow diagonalizability if the condition of irreducibility is dropped, but the problem of whether every irreducible sign pattern with minimum rank of 3 allows diagonalizability remains open. In this paper it is shown that irreducible sign patterns with minimum rank of 3 under certain conditions on the underlying graph allow diagonalizability. An alternate proof of the results that every sign pattern matrix with minimum rank of 2 and no zero lines allow diagonalizability with rank of 2 and also that every full sign pattern allows diagonalizability with all permissible ranks of the sign pattern is given. Some open problems regarding composite cycles in an irreducible symmetric sign pattern that support of a rank principal certificate are also answered.

Keywords: irreducible sign patterns, minimum rank, symmetric sign patterns, rank -principal certificate, allowing diagonalizability

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2723 Modelling Structural Breaks in Stock Price Time Series Using Stochastic Differential Equations

Authors: Daniil Karzanov

Abstract:

This paper studies the effect of quarterly earnings reports on the stock price. The profitability of the stock is modeled by geometric Brownian diffusion and the Constant Elasticity of Variance model. We fit several variations of stochastic differential equations to the pre-and after-report period using the Maximum Likelihood Estimation and Grid Search of parameters method. By examining the change in the model parameters after reports’ publication, the study reveals that the reports have enough evidence to be a structural breakpoint, meaning that all the forecast models exploited are not applicable for forecasting and should be refitted shortly.

Keywords: stock market, earnings reports, financial time series, structural breaks, stochastic differential equations

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2722 A Study and Design Scarf Collection Applied Vietnamese Traditional Patterns by Using Printing Method on Fabric

Authors: Mai Anh Pham Ho

Abstract:

Scarf products today is a symbol of fashion to decorate, to make our life more beautiful and bring new features to our living space. It also shows the cultural identity by using the traditional patterns that make easily to introduce the image of Vietnam to other nations all over the world. Therefore, the purpose of this research is to classify Vietnamese traditional patterns according to the era and dynasties. Vietnamese traditional patterns through the dynasties of Vietnamese history are done and classified by five groups of patterns including the geometric patterns, the natural patterns, the animal patterns, the floral patterns, and the character patterns in the Prehistoric times, the Bronze and Iron age, the Chinese domination, the Ngo-Dinh-TienLe-Ly-Tran-Ho dynasty, and the LeSo-Mac-LeTrinh-TaySon-Nguyen dynasty. Besides, there are some special kinds of Vietnamese traditional patterns like buffalo, lotus, bronze-drum, Phuc Loc Tho character, and so on. Extensive research was conducted for modernizing scarf collection applied Vietnamese traditional patterns which the fashion trend is used on creating works. The concept, target, image map, lifestyle map, motif, colours, arrangement and completion of patterns on scarf were set up. The scarf collection is designed and developed by the Adobe Illustrator program with three colour ways for each scarf. Upon completion of the research, digital printing technology is chosen for using on scarf collection which Vietnamese traditional patterns were researched deeply and widely with the purpose of establishment the basic background for Vietnamese culture in order to identify Vietnamese national personality as well as establish and preserve the cultural heritage.

Keywords: scarf collection, Vietnamese traditional patterns, printing methods, fabric design

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2721 Effect of Long Term Orientation and Indulgence on Earnings Management: The Moderating Role of Legal Tradition

Authors: I. Martinez-Conesa, E. Garcia-Meca, M. Barradas-Quiroz

Abstract:

The objective of this study is to assess the impact on earnings management of latest two Hofstede cultural dimensions: long-term orientation and indulgence. Long-term orientation represents the alignment of a society towards the future and indulgence expresses the extent to which a society exhibits willingness, or restrain, to realise their impulses. Additionally, this paper tests if there are relevant differences by testing the moderating role of the legal tradition, Continental versus Anglo-Saxon. Our sample comprises 15 countries: Belgium, Canada, Germany, Spain, France, Great Britain, Hong Kong, India, Japan, Korea, Netherlands, Philippines, Portugal, Sweden, and Thailand, with a total of 12,936 observations from 2003 to 2013. Our results show that managers in countries with high levels of long-term orientation reduce their levels of discretionary accruals. The findings do not confirm the effect of indulgence on earnings management. In addition, our results confirm previous literature regarding the effect of individualism, noting that firms in countries with high levels of collectivism might be more inclined to use earnings discretion to protect the welfare of the collective group of firm stakeholders. Uncertainty avoidance results in downwards earnings management as well as high disclosure, suggesting that less manipulation takes place when transparency is higher. Indulgence is the cultural dimension that confronts wellbeing versus survival; dimension is formulated including happiness, the perception of live control and the importance of leisure. Indulgence shows a weak negative correlation with power distance indicating a slight tendency for more hierarchical societies to be less indulgent. Anglo-Saxon countries are a positive effect of individualism and a negative effect of masculinity, uncertainty avoidance, and disclosure. With respect to continental countries, we can see a significant and positive effect of individualism and a significant and negative effect of masculinity, long-term orientation, and indulgence. Therefore, we observe the negative effect on earnings management provoked by higher disclosure and uncertainty avoidance only happens in Anglo-Saxon countries. Meanwhile, the improvement in reporting quality motivated by higher long-term orientation and higher indulgence is dominant in Continental countries. Our results confirm that there is a moderating effect of the legal system in the association between culture and earnings management. This effect is especially relevant in the dimensions related to uncertainty avoidance, long term orientation, indulgence, and disclosure. The negative effect of long-term orientation on earnings management only happens in those countries set in continental legal systems because of the Anglo-Saxon legal systems is supported by the decisions of the courts and the traditions, so it already has long-term orientation. That does not occur in continental systems, depending mainly of contend of the law. Sensitivity analysis used with Jones modified CP model, Jones Standard model and Jones Standard CP model confirm the robustness of these results. This paper collaborates towards a better understanding on how earnings management, culture and legal systems relate to each other, and contribute to previous literature by examining the influence of the two latest Hofstede’s dimensions not previously studied in papers.

Keywords: Hofstede, long-term-orientation, earnings management, indulgence

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2720 Quality Assurance in Software Design Patterns

Authors: Rabbia Tariq, Hannan Sajjad, Mehreen Sirshar

Abstract:

Design patterns are widely used to make the process of development easier as they greatly help the developers to develop the software. Different design patterns have been introduced till now but the behavior of same design pattern may differ in different domains that can lead to the wrong selection of the design pattern. The paper aims to discover the design patterns that suits best with respect to their domain thereby helping the developers to choose an effective design pattern. It presents the comprehensive analysis of design patterns based on different methodologies that include simulation, case study and comparison of various algorithms. Due to the difference of the domain the methodology used in one domain may be inapplicable to the other domain. The paper draws a conclusion based on strength and limitation of each design pattern in their respective domain.

Keywords: design patterns, evaluation, quality assurance, software domains

Procedia PDF Downloads 481