Earnings management, global financial crisis (GFC) and Australian manufacturing companies
Date
2012
Authors
Sunityo Shauki, E.R.
Harahap, S.N.
Bachtiar, Y.
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Conference paper
Citation
Proceedings of Airlangga Accounting International Conference and Doctorial Colloquium 2012, 2012, pp.1-13
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AAIC 2012 Airlangga Accounting International Conference (28 Jun 2012 - 29 Jun 2012 : Bali, Indonesia)
Abstract
The purpose of this paper is to investigate whether firms expect to voluntarily increase company’s earnings higher than expected earnings during an economy-wide financial crisis, like the Global Financial Crisis (GFC). Earnings management is where managers choose accounting and reporting methods as well as estimates that do not adequately reflect their firms’ underlying economic performance, especially during the difficult time that the company is facing (i.e. during the crisis). By using company’s financial reporting, this study is aimed to find out reasoning behind manager’s behaviour especially surrounding the crisis period where efficiency and not opportunistic perspectives of Positive Accounting Theory (PAT) is applied. Prospect Theory introduced by by Kahneman and Tversky (1979) is also applied in this study.Using descriptive statistics and statistical test on mean differences, this study is conducted. First, using descriptive statistics, statistical figures of three DA’s models(Jones, 1991; Dechow, 2010; and Kaznik, 1999) was calculated in order to observe DA figures in the period between 2006 and 2008. Secondly, using statistical test on mean differences this will look at the different DA patterns of each model between2006 (non crisis year), 2007 (crisis year), and 2008 (non crisis year).
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Copyright 2012 the authors