Financial Reports Quality and Discretionary Accruals Management: Evidence from the Latin American Market
DOI:
https://doi.org/10.17524/repec.v19i1.3496Keywords:
Gerenciamento de Resultados, Accruals Discricionários, Qualidade de AuditoriaAbstract
Objective: This study investigates the relationship between the quality of financial reports, as assessed by auditors, and quarterly earnings management in publicly traded companies in Latin America.
Method: The analysis was conducted using the Dunn-Bonferroni test on 457 companies from Argentina, Brazil, Colombia, and Mexico between 2015 and 2019. Discretionary accruals served as a proxy for earnings management, estimated using Pae’s (2005) model with data from Thomson Reuters®. The indicators proposed by Tang et al. (2016) were used to assess the quality of financial reports.
Results: The findings show that discretionary accruals are significantly higher in the fourth quarter compared to other quarters, while the first quarter differs significantly from the second and third. Brazil, Colombia, and Mexico reported lower levels of earnings management and higher financial reporting quality than Argentina. These results suggest that countries with higher-quality financial reporting, as indicated by auditors’ opinions, exhibit lower levels of quarterly earnings management, especially in the fourth quarter.
Contributions: This study provides valuable insights for regulators and auditors and emphasizes the variation in earnings management disclosures across interim periods and national contexts. It supports the development of higher-quality earnings disclosures in emerging markets, potentially attracting more analysts and investors.
References
Akerlof, G. A. (1970). The market for’lemons’: Quality uncertainty and the market mechanism. Quarterly Journal of Economics, 84(3), 488-500. https://doi.org/10.2307/1879431
Balassiano, M. G. (2012). Estrutura de propriedade e teoria da agência: um estudo de empresas brasileiras e seus diferentes tipos de controladores (Doctoral dissertation).
Ball, R. (2016). IFRS–10 years later. Accounting and business research, 46(5), 545-571. https://doi.org/10.1080/00014788.2016.1182710
Barroso, M. J., & Dantas, J. A. (2021). Eventos Subsequentes: Determinantes da divulgação pelas companhias e da consideração no relatório dos auditores. Brazilian Journal of Development, 7(5), 45493-45520. https://doi.org/10.34117/bjdv.v7i5.29407
Beatty, A., & Liao, S. (2014). Financial accounting in the banking industry: A review of the empirical literature. Journal of Accounting and Economics, 58(2-3), 339-383. https://doi.org/10.1016/j.jacceco.2014.08.009
Bédard, J., & Courteau, L. (2015). Benefits and costs of auditor's assurance: Evidence from the review of quarterly financial statements. Contemporary Accounting Research, 32(1), 308-335. https://doi.org/10.1111/1911-3846.12091
Boina, T. M., & Macedo, M. A. S. (2018) Capacidade preditiva de accruals antes e após as IFRS no mercado acionário brasileiro. Revista Contabilidade & Finanças, 29(78), 375-389. https://doi.org/10.1590/rc&f.v29i78.150651
Call, A. C., Chen, S., Miao, B., & Tong, Y. H. (2014). Short-term earnings guidance and accrual-based earnings management. Review of accounting studies, 19, 955-987. https://doi.org/10.1007/s11142-013-9270-7
Cieslewicz, J. K. (2014). Relationships between national economic culture, institutions, and accounting: Implications for IFRS. Critical perspectives on accounting, 25(6), 511-528. https://doi.org/10.1016/j.cpa.2013.03.006
Choi, J. H., & Wong, T. J. (2007). Auditors' governance functions and legal environments: An international investigation. Contemporary accounting research, 24(1), 13-46. 10.2139/ssrn.849746
Christensen, H. B. et al. (2015). Incentives or standards: What determines accounting quality changes around IFRS adoption? European Accounting Review, 24(1), 31-61. https://doi.org/10.1080/09638180.2015.1009144
Collins, W. A., Hopwood, W. S., & McKeown, J. C. (1984). The predictability of interim earnings over alternative quarters. Journal of Accounting Research, 467-479. https://doi.org/10.2307/2490659
Das, S., Shroff, P. K., & Zhang, H. (2009). Quarterly earnings patterns and earnings management. Contemporary accounting research, 26(3), 797-831. https://doi.org/10.1506/car.26.3.7
Dechow, P. M. et al. (2012). Detecting earnings management: A new approach. Journal of accounting research, 50(2), 275-334. https://doi.org/10.1111/j.1475-679X.2012.00449.x
Dechow, P., Ge, W., & Schrand, C. (2010). Understanding earnings quality: A review of the proxies, their determinants and their consequences. Journal of accounting and economics, 50(2-3), 344-401. https://doi.org/10.1016/j.jacceco.2010.09.001
Doran, David T. (1995). Earnings performance and interim reporting. Journal of Applied Business Research (JABR), 11(1), 67-72. https://doi.org/10.19030/jabr.v11i1.5893
Dutra, T. A. G. L. (2020) A Auditoria Financeira de Agências Federais nos EUA tem relação custo-benefício positiva e as lições aprendidas são aplicáveis ao Brasil. Revista do TCU, 145, 11-28.
Enomoto, M., Kimura, F., & Yamaguchi, T. (2015). Accrual-based and real earnings management: An international comparison for investor protection. Journal of Contemporary Accounting & Economics, 11(3), 183-198. https://doi.org/10.1016/j.jcae.2015.07.001
Gu, Z., Lee, C. W. J., & Rosett, J. G. (2005). What determines the variability of accounting accruals?. Review of Quantitative Finance and Accounting, 24, 313-334. https://doi.org/10.1007/s11156-005-6869-1
Healy, P. M., & Wahlen, J. M. (1999). A review of the earnings management literature and its implications for standard setting. Accounting Horizons, 13(4), 365–383.
Holtz, L., Salaroli, A. R., Sarlo Neto, A., Bortolon, P. M., & Paulo, E. (2014). A Prática de Reconhecimento e Mensuração das Perdas Estimadas em Créditos de Liquidação Duvidosa Antes e Após a Adoção das Normas Internacionais de Contabilidade. Sociedade, Contabilidade e Gestão, 9(1).
Hu, D. Abnormal audit fees and auditor size in the Japanese audit market. (2015). Academy of Accounting and Financial Studies Journal, 19(3), 141.
Huguet, D., & Gandía, J. L. (2016). Audit and earnings management in Spanish SMEs. BRQ Business Research Quarterly, 19(3), 171-187. https://doi.org/10.1016/j.brq.2015.12.001
Jeter, D. C., & Shivakumar, L. (1999). Cross-sectional estimation of abnormal accruals using quarterly and annual data: Effectiveness in detecting event-specific earnings management. Accounting and Business Research, 29(4), 299-319.
Jones, J. J. (1991). Gerenciamento de ganhos durante investigações de alívio de importação. Journal of Accounting Research, 29(2), 193-228.
Koetz, C. M., Koetz, C. I., & Marcon, R. (2011). A influência do incentivo no comportamento oportunista de risco moral: uma análise experimental. Gestão. Org, 9(3), 615-639.
La Porta, R. et al. (2002). Investor protection and corporate valuation. The journal of finance, 57(3), 1147-1170. https://doi.org/10.1111/1540-6261.00457
Lin, J. W., & Hwang, M. I. (2010). Audit quality, corporate governance, and earnings management: A meta‐analysis. International journal of auditing, 14(1), 57-77. https://doi.org/10.1111/j.1099-1123.2009.00403.x
Lopes, A. B., & Walker, M. (2008). Firm-level incentives and the informativeness of accounting reports: an experiment in Brazil. Available at SSRN 1095781.
Luthan, E., & Satria, I. (2016). The effect of good corporate governance mechanism to earnings management before and after IFRS Convergence. Procedia-Social and Behavioral Sciences, 219, 465-471. https://doi.org/10.1016/j.sbspro.2016.05.021
Marques, J. S., & Ferreira, F. R. (2020). Gerenciamento de resultados por accruals x gerenciamento por decisões operacionais: um estudo empírico em empresas brasileiras listadas na B3. In Anais do Congresso ANPCONT, Foz do Iguaçu, Brasil (Vol. 14).
Martins, V. G., Paulo, E., & do Monte, P. A. (2016). O gerenciamento de resultados contábeis exerce influência na acurácia da previsão de analistas no Brasil?. Revista Universo Contábil, 12(3), 73-90.
Miko, N. U., & Kamardin, H. (2015). Impact of audit committee and audit quality on preventing earnings management in the pre-and post-Nigerian corporate governance code 2011. Procedia-Social and Behavioral Sciences, 172, 651-657. https://doi.org/10.1016/j.sbspro.2015.01.415
Mota, R. H. G. et al. (2017). Previsão de lucro e gerenciamento de resultados: evidências empíricas no mercado acionário brasileiro. Revista Universo Contábil, 13(1), 06-26.
Moura, G. D., Zanchi, M., Mazzioni, S., Macêdo, F. F. R. R., & Krueger, S. D. (2017). Determinantes da Qualidade da Informação Contábil em Grandes Companhias Abertas Listadas na BM&FBOVESPA. Revista de Educação e Pesquisa em Contabilidade (REPeC), 11(3). 10.17524/repec. v11i3.1572.
Pae, J. (2005). Expected accrual models: The impact of operating cash flows and reversals of accruals. Review of Quantitative Finance and Accounting, 24(1), 5–22.
Paulo, Edilson. (2007). Manipulação das informações contábeis: uma análise teórica e empírica sobre os modelos operacionais de detecção de gerenciamento de resultados. Tese de Doutorado. Universidade de São Paulo.
Rodrigues, R. M. R. C., Melo, C. L. L. D., & Paulo, E. (2019). Gerenciamento de resultados e nível dos accruals discricionários trimestrais no mercado acionário brasileiro. BBR. Brazilian Business Review, 16, 297-314.
Salehi, M., Moradi, M., & Paiydarmanesh, N. (2017). The effect of corporate governance and audit quality on disclosure quality: Evidence from Tehran stock exchange. Periodica Polytechnica Social and Management Sciences, 25(1), 32-48.
Silva, A., & Rodrigues, A. M. (2017). Mecanismos de controlo das normas internacionais de contabilidade. European Journal of Applied Business and Management, 57-72. https://doi.org/10.58869/EJABM
Sletten, Ewa et al. (2018). When and why do IPO firms manage earnings?. Review of Accounting Studies, 23(3), 872-906.
Tang, Q., Chen, H., & Lin, Z. (2016). How to measure country-level financial reporting quality?. Journal of Financial Reporting and Accounting, 14(2), 230-265. https://doi.org/10.1108/JFRA-09-2014-0073
Viana, D. B. C. C., Caixe, D. F., & Ponte, V. R. M. R. (2019). Efeito moderador da instabilidade econômica na relação entre concentração de controle e valor de mercado: evidências empíricas na América Latina. BBR. Brazilian Business Review, 16, 400-415. https://doi.org/10.15728/bbr.2019.16.4.6
Watts, R. L., & Zimmerman, J. L. (1986). Teoria da contabilidade positiva.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 Journal of Education and Research in Accounting (REPeC)
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Authors who publish with this journal agree to the following terms:
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under Creative Commons Attribution 3.0 Unported License, which allows the sharing of the work and recognition of authorship and its initial publication in this journal. This license allows others to distribute, remix, adapt, or create derivative works, even for commercial purposes, provided credit is given for the original creation.
b)There is no financial compensation to the authors in any capacity, for articles published in RePEc.c) The articles published in RePEc are the sole responsibility of the authors.
