Earnings Management Research Paper

Earnings Management Research Paper-63
Building on this phenomenon, we observed that the tourism industries of China and Taiwan have both experienced significant growth in the past decade with the number of tourists traveling to and from these countries rising by 5 per cent or more per year.Therefore, the high potential revenue from travel and tourism expansion in China and Taiwan has created the expectation of a lucrative market for investors (Chen and Kim, 2010).

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Prior research indicated that firms with a lower level of corporate governance and stock trading regulation in undeveloped countries exhibited increased earnings management (Almadi and Lazic, 2016).

The authors asserted that earnings management poses a considerable problem for investors who rely on the accuracy and transparency of a firm’s financial information in deriving investment decisions.

China and Taiwan, although separated for more than 100 years politically, share the same language and cultural roots.

However, China and Taiwan differ not only in their political and social systems but also in their economic systems.

Based on empirical results, the authors found a significant negative correlation between market power and discretionary accruals and market concentration (or lower market competition) and discretionary accruals in both the Chinese or Taiwanese markets. This article is published under the Creative Commons Attribution (CC BY 4.0) licence.

Although the Chinese travel companies enjoyed higher market power and market concentration, they engaged in less earnings manipulation than their Taiwanese counterparts as a result of the Chinese Government regulation. https://doi.org/10.1108/JFEP-08-2018-0108 Download as . Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial & non-commercial purposes), subject to full attribution to the original publication and authors.

This research contributes to the earnings management literature by examining a specific industry of tourism. The authors linked market power and market competition with earnings management simultaneously and then compared the Chinese and Taiwanese tourism industries in manipulating earnings. One of these accounting practices is called earnings management, also known as earning manipulation.

Earnings management refers to a strategy used by a firm’s management to apply accounting rules flexibly to manipulate corporate profits (Bodie , 2013).

Based on listed travel companies, generalization of the research results to entire tourism industry is limited. The full terms of this licence may be seen at Financial reports are used to convey corporate information on firm performance.

This study compares the travel companies’ practices of smoothing out earnings between China and Taiwan, thus helping managers and investors in making their financing, investment decisions. (2019), "Market power, competition and earnings management: accrual-based activities", Journal of Financial Economic Policy, Vol. However, corporate managers could choose reporting methods to reflect the financial figures to their own advantages.

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