Income Smoothing Behaviour By Asian Transportation Firms
figures. Using a sample of 1,094 transportation firm-year observations before and throughout theglobal financial crisis (GFC) period of 2006-2009 in seven Asian countries, the purpose of this study isto investigate whether managers’ smooth reported earnings to meet the benchmark target of last year’...
| Main Authors: | , , |
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| Format: | Journal Article |
| Published: |
Emerald Group Publishing Ltd.
2013
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| Online Access: | http://hdl.handle.net/20.500.11937/49391 |
| _version_ | 1848758230772088832 |
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| author | Rusmin, Rusmin Scully, Glennda Tower, Greg |
| author_facet | Rusmin, Rusmin Scully, Glennda Tower, Greg |
| author_sort | Rusmin, Rusmin |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | figures. Using a sample of 1,094 transportation firm-year observations before and throughout theglobal financial crisis (GFC) period of 2006-2009 in seven Asian countries, the purpose of this study isto investigate whether managers’ smooth reported earnings to meet the benchmark target of last year’searnings figure.Design/methodology/approach – Following previous research (e.g.,Burgstahler and Dichev;Degeorge, Patel, and Zeckhauser; Holland and Ramsay; Burgstahler and Eames; Daske, Gebhardt, andMcLeay; Gore, Pope, and Singh; Charoenwong and Jiraporn), this study uses an earnings benchmark ofsustaining last year’s performance as the key indicator of earnings management.Findings – The empirical evidence reveals that corporate managers seem to opportunisticallysmooth income to beat earnings targets. The results also show that the AuditQuality, EcoCrisis andSize are not explanatory for the smoothing behavior of the above target firms. However, theindependent variables EcoCrisis and Size are predictors for the smoothing behavior of the sample firmsthat engage in income-increasing earnings management. The coefficient on EcoCrisis is negative andsignificantly (at p ¼ 0.001) related to the earnings management measure, suggesting that during aperiod of economic stress, transportation firm managers engage in less aggressive income-increasingdiscretionary accruals strategy. Furthermore, the findings confirm that large size firms exhibit lessaggressive income-increasing earnings management behavior. Specifically, the coefficient on Size isnegative and moderately significant ( p ¼ 0.056) associated with earnings management measure.Originality/value – This study strongly supports the political costs hypothesis which argues thatlarger firms are subject to more public scrutiny and political actions therein exhibiting less aggressiveincome-increasing earnings management behavior. The authors further note a “big bath” phenomenonduring the GFC period suggesting that corporate managers manipulate their reported earningsdownward to make poor results even worse in the current financial period, artificially enhancingfuture year’s earnings. |
| first_indexed | 2025-11-14T09:40:41Z |
| format | Journal Article |
| id | curtin-20.500.11937-49391 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T09:40:41Z |
| publishDate | 2013 |
| publisher | Emerald Group Publishing Ltd. |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-493912017-09-13T16:07:45Z Income Smoothing Behaviour By Asian Transportation Firms Rusmin, Rusmin Scully, Glennda Tower, Greg figures. Using a sample of 1,094 transportation firm-year observations before and throughout theglobal financial crisis (GFC) period of 2006-2009 in seven Asian countries, the purpose of this study isto investigate whether managers’ smooth reported earnings to meet the benchmark target of last year’searnings figure.Design/methodology/approach – Following previous research (e.g.,Burgstahler and Dichev;Degeorge, Patel, and Zeckhauser; Holland and Ramsay; Burgstahler and Eames; Daske, Gebhardt, andMcLeay; Gore, Pope, and Singh; Charoenwong and Jiraporn), this study uses an earnings benchmark ofsustaining last year’s performance as the key indicator of earnings management.Findings – The empirical evidence reveals that corporate managers seem to opportunisticallysmooth income to beat earnings targets. The results also show that the AuditQuality, EcoCrisis andSize are not explanatory for the smoothing behavior of the above target firms. However, theindependent variables EcoCrisis and Size are predictors for the smoothing behavior of the sample firmsthat engage in income-increasing earnings management. The coefficient on EcoCrisis is negative andsignificantly (at p ¼ 0.001) related to the earnings management measure, suggesting that during aperiod of economic stress, transportation firm managers engage in less aggressive income-increasingdiscretionary accruals strategy. Furthermore, the findings confirm that large size firms exhibit lessaggressive income-increasing earnings management behavior. Specifically, the coefficient on Size isnegative and moderately significant ( p ¼ 0.056) associated with earnings management measure.Originality/value – This study strongly supports the political costs hypothesis which argues thatlarger firms are subject to more public scrutiny and political actions therein exhibiting less aggressiveincome-increasing earnings management behavior. The authors further note a “big bath” phenomenonduring the GFC period suggesting that corporate managers manipulate their reported earningsdownward to make poor results even worse in the current financial period, artificially enhancingfuture year’s earnings. 2013 Journal Article http://hdl.handle.net/20.500.11937/49391 10.1108/02686901311282489 Emerald Group Publishing Ltd. restricted |
| spellingShingle | Rusmin, Rusmin Scully, Glennda Tower, Greg Income Smoothing Behaviour By Asian Transportation Firms |
| title | Income Smoothing Behaviour By Asian Transportation Firms |
| title_full | Income Smoothing Behaviour By Asian Transportation Firms |
| title_fullStr | Income Smoothing Behaviour By Asian Transportation Firms |
| title_full_unstemmed | Income Smoothing Behaviour By Asian Transportation Firms |
| title_short | Income Smoothing Behaviour By Asian Transportation Firms |
| title_sort | income smoothing behaviour by asian transportation firms |
| url | http://hdl.handle.net/20.500.11937/49391 |