Impact of earnings management on financial performance
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The purpose of this study is to empirically analyze the impact of earnings management on financial performance in the period after the introduction of the Korean International Accounting Standards. Existing studies have mainly used stock returns and excess net income as substitutes for financial performance, but in this study, ROA, ROE, and SLS are used as substitutes for financial performance. Since the impact of earnings management on the bond market and financial performance are different, it differs from previous studies in verifying which earnings management measures have a relatively more important impact on where. Data from 7,583 companies/year from 2010 to 2019 were used and empirically analyzed. The three measures of REM and AEM, abnormal operating cash flow, abnormal production cost, abnormal discretionary expenditure, and their comprehensive measures, were found to have a significant positive (+) effect on financial performance (ROA, ROE, SLS) even after controlling growth potential, debt ratio, and corporate size. It explains that ROA and ROE, which explain accounting profits, are affecting future profitability through corporate earnings management. It was also found to have a significant positive (+) effect on SLS. This suggests that companies with a high level of accrual earnings management can increase their temporary profits by raising their reported profits for the current period. This means that although real earnings management can increase temporary profits and show a positive appearance to investors, information risk due to information asymmetry can increase, which can negatively affect future corporate value. Through profit adjustment, companies report their financial position positively, suggesting that sales are increasing through users. This analysis is considered to help stakeholders understand the importance of a study, as it analyzes real earnings management and accrual earnings management by applying the same to financial performance.
Abstract
The purpose of this study is to empirically analyze the impact of earnings management on financial performance in the period after the introduction of the Korean International Accounting Standards. Existing studies have mainly used stock returns and excess net income as substitutes for financial performance, but in this study, ROA, ROE, and SLS are used as substitutes for financial performance. Since the impact of earnings management on the bond market and financial performance are different, it differs from previous studies in verifying which earnings management measures have a relatively more important impact on where. Data from 7,583 companies/year from 2010 to 2019 were used and empirically analyzed. The three measures of REM and AEM, abnormal operating cash flow, abnormal production cost, abnormal discretionary expenditure, and their comprehensive measures, were found to have a significant positive (+) effect on financial performance (ROA, ROE, SLS) even after controlling growth potential, debt ratio, and corporate size. It explains that ROA and ROE, which explain accounting profits, are affecting future profitability through corporate earnings management. It was also found to have a significant positive (+) effect on SLS. This suggests that companies with a high level of accrual earnings management can increase their temporary profits by raising their reported profits for the current period. This means that although real earnings management can increase temporary profits and show a positive appearance to investors, information risk due to information asymmetry can increase, which can negatively affect future corporate value. Through profit adjustment, companies report their financial position positively, suggesting that sales are increasing through users. This analysis is considered to help stakeholders understand the importance of a study, as it analyzes real earnings management and accrual earnings management by applying the same to financial performance.
참고문헌 (19)
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