The fine line between earnings management and corporate fraud

Authors

  • Monize Ramos do Nascimento Universidade de Brasília
  • Rodrigo de Souza Gonçalves Universidade de Brasília

DOI:

https://doi.org/10.17524/repec.v18i2.3315

Keywords:

Gerencimamento de Resultados, Fraudes Corporativas, Demonstrações Financeiras

Abstract

Objective: To investigate whether the levels of earnings management increase in periods before corporate fraud is uncovered.

Method: Three different samples were analyzed: Sample 1, comprising all non-financial companies listed in Brazil, Bolsa, Balcão (B3); Sample 2, comprising companies convicted of fraud; and Sample 3, in which fraudulent and non-fraudulent companies were matched. Logit regression was performed for panel data in Sample 1; a descriptive analysis was performed by quartiles for Sample 2; and Altman’s Z score, Mann-Whitney U test, and graphical analysis were performed for Sample 3.

Results: Generally, the results indicate that companies involved with fraud more frequently resourced earnings management companies not involved with fraud; however, it was impossible to identify the exact period when fraud was committed.

Contributions: This study contributes to organizations and their respective gatekeepers. Its contributions include innovations upon previous studies: (i) it proposes different variable and modeling approaches; (ii) it is a pioneer study in the Brazilian context; (iii) it encourages a reflection upon the impact of competition between reliable information and quality of profits.

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Published

2024-06-29

How to Cite

Ramos do Nascimento, M., & de Souza Gonçalves, R. (2024). The fine line between earnings management and corporate fraud. Journal of Education and Research in Accounting (REPeC), 18(2). https://doi.org/10.17524/repec.v18i2.3315

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