Exploring the Influence of Earnings Management on the Value Relevance of Financial Statements: Evidence from the Bucharest Stock Exchange
Abstract
:1. Introduction
2. Literature Review and Hypotheses Development
2.1. Insights on the Nexus between Accounting Information and Market Dynamics
2.2. Is Earnings Management a Reporting Strategy or an Opportunistic Practice?
3. Research Methods
3.1. The Studied Population and Analyzed Sample
3.2. Variables Analyzed, Data Source, and Models Proposed for Testing
- -
- DAp is a dummy variable which takes value 1 if the DA is positive (existence of earnings management based on recognition of revenues or non-recognition of expenses) and 0 if the DA is negative (existence of earnings management based on non-recognition of revenues or recognition of expenses) for a company i at the end of year t;
- -
- αi=0,…,7 are the parameters of the model (α0 represents the model’s intercept and indicates the average share price for companies that have negative DA, αi=1…,3 indicate influence of independent variables EPS, BVS, and CFS, on share price (P) for the companies with negative DA; α4 indicates the difference between the average share price for companies that have negative DA and companies with positive DA; and αi=5…,7 indicate the supplementary influence of independent variables EPS, BVS, and CFS, on share price (P) for the companies with positive DA).
- -
- and all the other variables are presented in model form Equation (1).
4. Results and Discussions
4.1. Research Insights and Implications
4.2. Limitations of This Study
5. Conclusions
Author Contributions
Funding
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
References
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Variable | N | Mean | Std. Deviation | Minimum | Maximum | |
---|---|---|---|---|---|---|
Price * | DAp = 0 | 102 | 11.1684 | 43.51381 | 0.00 | 316.00 |
DAp = 1 | 146 | 8.6882 | 36.38668 | 0.00 | 360.00 | |
Total | 248 | 9.7083 | 39.40789 | 0.00 | 360.00 | |
EPS * | DAp = 0 | 102 | 1.4730 | 7.34307 | −7.61 | 61.22 |
DAp = 1 | 146 | 1.6559 | 8.71519 | −3.43 | 90.72 | |
Total | 248 | 1.5807 | 8.16366 | −7.61 | 90.72 | |
BVS * | DAp = 0 | 102 | 25.0513 | 96.78730 | −7.26 | 658.30 |
DAp = 1 | 146 | 19.5508 | 86.68658 | −6.70 | 732.32 | |
Total | 248 | 21.8131 | 90.82560 | −7.26 | 732.32 | |
CFS ** | DAp = 0 | 102 | 3.4818 | 12.83566 | −0.46 | 89.56 |
DAp = 1 | 146 | 0.2230 | 2.59920 | −10.90 | 21.32 | |
Total | 248 | 1.5633 | 8.59750 | −10.90 | 89.56 | |
DA ** | DAp = 0 | 102 | −0.2251 | 0.8482 | −7.69 | −0.01 |
DAp = 1 | 146 | 0.1573 | 0.3171 | 0.00 | 3.37 | |
Total | 248 | 0.0000 | 0.6235 | −7.69 | 3.37 |
N | Mean | Std. Deviation | Std. Error | Minimum | Maximum | ||
---|---|---|---|---|---|---|---|
Price | 2018 | 62 | 9.1407 | 41.15699 | 5.22694 | 0.00 | 316.00 |
2019 | 62 | 10.4945 | 46.67837 | 5.92816 | 0.00 | 360.00 | |
2020 | 62 | 9.0818 | 37.14802 | 4.71780 | 0.00 | 283.00 | |
2021 | 62 | 10.1162 | 32.15645 | 4.08387 | 0.00 | 236.00 | |
Total | 248 | 9.7083 | 39.40789 | 2.50240 | 0.00 | 360.00 | |
EPS | 2018 | 62 | 1.1108 | 5.00241 | 0.63531 | −7.56 | 35.95 |
2019 | 62 | 1.3631 | 6.18973 | 0.78610 | −2.05 | 46.89 | |
2020 | 62 | 1.6451 | 7.96313 | 1.01132 | −2.16 | 61.22 | |
2021 | 62 | 2.2036 | 11.93480 | 1.51572 | −7.61 | 90.72 | |
Total | 248 | 1.5807 | 8.16366 | 0.51839 | −7.61 | 90.72 | |
BVS | 2018 | 62 | 20.2533 | 85.36654 | 10.84156 | −6.56 | 628.48 |
2019 | 62 | 21.3419 | 88.83084 | 11.28153 | −6.70 | 642.12 | |
2020 | 62 | 21.9833 | 91.12955 | 11.57346 | −6.90 | 658.30 | |
2021 | 62 | 23.6739 | 99.56732 | 12.64506 | −7.26 | 732.32 | |
Total | 248 | 21.8131 | 90.82560 | 5.76743 | −7.26 | 732.32 | |
CFS | 2018 | 62 | 2.5959 | 12.26186 | 1.55726 | −0.19 | 89.56 |
2019 | 62 | 0.5848 | 2.83580 | 0.36015 | −1.11 | 21.32 | |
2020 | 62 | 1.6907 | 8.81202 | 1.11913 | −10.90 | 52.40 | |
2021 | 62 | 1.3818 | 7.81982 | 0.99312 | −7.31 | 57.61 | |
Total | 248 | 1.5633 | 8.59750 | 0.54594 | −10.90 | 89.56 | |
DA | 2018 | 62 | 0.0352 | 0.26365 | 0.03348 | −0.409 | 1.163 |
2019 | 62 | −0.0367 | 0.52084 | 0.06614 | −3.931 | 0.466 | |
2020 | 62 | 0.0423 | 0.47285 | 0.06005 | −0.995 | 3.366 | |
2021 | 62 | −0.0408 | 1.00177 | 0.12722 | −7.692 | 0.709 | |
Total | 248 | 0.0000 | 0.62349 | 0.03959 | −7.692 | 3.366 |
Price | EPS | BVS | CFS | DA | ||
---|---|---|---|---|---|---|
Price | Pearson Correlation | 1 | 0.110 | 0.361 ** | 0.495 ** | 0.005 |
Sig. (2-tailed) | 0.085 | 0.000 | 0.000 | 0.938 | ||
EPS | Pearson Correlation | 0.110 | 1 | 0.902 ** | 0.394 ** | 0.018 |
Sig. (2-tailed) | 0.085 | 0.000 | 0.000 | 0.772 | ||
BVS | Pearson Correlation | 0.361 ** | 0.902 ** | 1 | 0.613 ** | 0.010 |
Sig. (2-tailed) | 0.000 | 0.000 | 0.000 | 0.879 | ||
CFS | Pearson Correlation | 0.495 ** | 0.394 ** | 0.613 ** | 1 | −0.035 |
Sig. (2-tailed) | 0.000 | 0.000 | 0.000 | 0.580 | ||
DA | Pearson Correlation | 0.005 | 0.018 | 0.010 | −0.035 | 1 |
Sig. (2-tailed) | 0.938 | 0.772 | 0.879 | 0.580 |
Dependent Variable: Price Included the Model from Equation (1) | ||||||
---|---|---|---|---|---|---|
Parameter | B | Std. Error | t | Sig. | 95% Confidence Interval | |
Lower Bound | Upper Bound | |||||
Intercept | 5.142 | 2.017 | 2.549 | 0.011 | 1.169 | 9.114 |
EPS | −4.800 | 0.628 | −7.649 | 0.000 | −6.036 | −3.564 |
BVS | 0.496 | 0.066 | 7.560 | 0.000 | 0.367 | 0.625 |
CFS | 0.854 | 0.326 | 2.620 | 0.009 | 0.212 | 1.496 |
Parameter | B | Std. Error | t | Sig. | 95% Confidence Interval | |
---|---|---|---|---|---|---|
Lower Bound | Upper Bound | |||||
Intercept | 4.390 | 2.736 | 1.604 | 0.110 | −1.000 | 9.780 |
EPS | −5.403 | 1.149 | −4.704 | 0.000 | −7.665 | −3.140 |
BVS | 0.357 | 0.118 | 3.018 | 0.003 | 0.124 | 0.591 |
CFS | 1.661 | 0.451 | 3.681 | 0.000 | 0.772 | 2.551 |
DAp | 0.733 | 3.545 | 0.207 | 0.836 | −6.251 | 7.717 |
DAp * EPS | 3.195 | 1.335 | 2.392 | 0.018 | 0.564 | 5.826 |
DAp * BVS | −0.093 | 0.139 | −0.668 | 0.505 | −0.365 | 0.180 |
DAp * CFS | 7.506 | 1.156 | 6.490 | 0.000 | 5.227 | 9.784 |
Dependent Variable a | ||||||
---|---|---|---|---|---|---|
Parameter | B | Std. Error | t | Sig. | 95% Confidence Interval | |
Lower Bound | Upper Bound | |||||
Intercept | 3.491 | 4.217 | 0.828 | 0.409 | −4.817 | 11.799 |
EPS | −5.436 | 1.159 | −4.691 | 0.000 | −7.718 | −3.153 |
BVS | 0.355 | 0.120 | 2.965 | 0.003 | 0.119 | 0.591 |
CFS | 1.689 | 0.459 | 3.682 | 0.000 | 0.785 | 2.592 |
DAp | 1.218 | 3.170 | 0.384 | 0.701 | −5.028 | 7.463 |
DA | 0.314 | 4.057 | 0.077 | 0.938 | −7.678 | 8.306 |
DAp * EPS | 3.241 | 1.347 | 2.405 | 0.017 | 0.586 | 5.895 |
DAp * BVS | −0.091 | 0.140 | −0.650 | 0.517 | −0.367 | 0.185 |
DAp * CFS | 7.570 | 1.169 | 6.476 | 0.000 | 5.267 | 9.873 |
DAp * DA | 1.269 | 7.734 | 0.164 | 0.870 | −13.968 | 16.505 |
Year 2019 | −0.718 | 4.910 | −0.146 | 0.884 | −10.391 | 8.955 |
Year 2020 | 4.068 | 4.926 | 0.826 | 0.410 | −5.637 | 13.774 |
Year 2021 | 0.725 | 4.936 | 0.147 | 0.883 | −8.999 | 10.449 |
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Burlacu, G.; Robu, I.-B.; Munteanu, I. Exploring the Influence of Earnings Management on the Value Relevance of Financial Statements: Evidence from the Bucharest Stock Exchange. Int. J. Financial Stud. 2024, 12, 72. https://doi.org/10.3390/ijfs12030072
Burlacu G, Robu I-B, Munteanu I. Exploring the Influence of Earnings Management on the Value Relevance of Financial Statements: Evidence from the Bucharest Stock Exchange. International Journal of Financial Studies. 2024; 12(3):72. https://doi.org/10.3390/ijfs12030072
Chicago/Turabian StyleBurlacu, Georgiana, Ioan-Bogdan Robu, and Ionela Munteanu. 2024. "Exploring the Influence of Earnings Management on the Value Relevance of Financial Statements: Evidence from the Bucharest Stock Exchange" International Journal of Financial Studies 12, no. 3: 72. https://doi.org/10.3390/ijfs12030072
APA StyleBurlacu, G., Robu, I. -B., & Munteanu, I. (2024). Exploring the Influence of Earnings Management on the Value Relevance of Financial Statements: Evidence from the Bucharest Stock Exchange. International Journal of Financial Studies, 12(3), 72. https://doi.org/10.3390/ijfs12030072