The Choice Between Accrual and Real Manipulation Around Information Uncertainty

2024
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Authors: Thi Thu Ha Nguyen; Salma Ibrahim
Published in: Proceedings of the 4th International Conference on Research in Management and Technovation
Publisher: Springer Nature Singapore

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Abstract

The chapter delves into the choice between accrual and real earnings manipulation under conditions of high information uncertainty. Previous studies have shown mixed evidence on the effectiveness of earnings management in beating earnings benchmarks. This research extends the existing literature by examining the role of information uncertainty, defined as 'value ambiguity' due to volatility in firms' fundamental values. The study hypothesizes that high information uncertainty makes it harder for investors to detect earnings management, leading managers to prefer accrual earnings management over real earnings manipulation. Empirical findings support this hypothesis, showing that firms with high information uncertainty engage more in accrual earnings management to meet earnings benchmarks. The study employs propensity-score matching to control for endogeneity and robustness checks to validate the results. The implications highlight the importance of scrutiny in financial reporting under high information uncertainty environments, benefiting both investors and regulators.

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Notes

This paper has developed from my Ph.D. thesis from Kingston University.

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Title: The Choice Between Accrual and Real Manipulation Around Information Uncertainty
Authors: Thi Thu Ha Nguyen
Salma Ibrahim
Publisher: Springer Nature Singapore
Book: Proceedings of the 4th International Conference on Research in Management and Technovation
Print ISBN: 978-981-9984-71-8

Electronic ISBN: 978-981-9984-72-5

Copyright Year: 2024
DOI: https://doi.org/10.1007/978-981-99-8472-5_2

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