10 papers analyzed
These studies suggest that earnings management involves manipulating financial reports for various strategic reasons, influenced by factors like forecasts, managerial incentives, firm characteristics, and international operations.
Earnings management refers to the manipulation of financial reports by company managers to either misrepresent the financial health of the company or to meet certain financial benchmarks. This practice can be driven by various motivations, including contractual obligations, market expectations, and personal incentives. Understanding the mechanisms, motivations, and implications of earnings management is crucial for stakeholders, including investors, regulators, and researchers.
Motivations for Earnings Management:
Methods of Earnings Management:
Detection and Implications:
Contextual Factors:
Earnings management is a multifaceted practice influenced by various internal and external motivations. Managers employ a range of techniques to manipulate financial reports, often driven by the need to meet financial benchmarks, avoid covenant violations, and enhance personal compensation. While detection remains challenging, understanding the underlying motivations and methods can help stakeholders better assess the financial health of firms. Despite its potential for misuse, earnings management can sometimes serve beneficial purposes, such as reducing the cost of truthful forecasting.
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