The use of Beneish M-scores to reveal creative accounting: evidence from Slovakia

Pavol Durana, Roman Blazek, Veronika Machova and Miroslav Krasnan
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Pavol Durana: University of Zilina, Slovakia
Roman Blazek: University of Zilina, Slovakia
Veronika Machova: School of Expertness and Valuation; Institute of Technology and Business in Ceske Budejovice, Czechia
Miroslav Krasnan: University of Zilina, Slovakia

Equilibrium. Quarterly Journal of Economics and Economic Policy, 2022, vol. 17, issue 2, 481-510

Abstract: Research background: In creative accounting, the primary goal of every enterprise is to increase and strengthen its market position. Over the years, manipulation of financial statements has also reached the territory of Central European countries, including the Slovak Republic. Therefore, an analysis was conducted to identify enterprises that handle accounting. This article focuses specifically on Sector A: agriculture, forestry, and fisheries. Purpose of the article: The aim of the article was to reveal the creative accounting practices of a sample of enterprises operating in the Slovak business environment in a sector using the Beneish model. Methods: The Beneish model was used to calculate the manipulation of enterprises’ financial statements. Both variants, that is, the 5-parameter model and 8-parameter model, were used for the calculation. The results of these models were plotted using graphs and receiver operating characteristic (ROC) curves. Findings & value added: Based on the use of both variants of the Beneish model, it was proven that enterprises in the analyzed sector use the possibility of manipulating financial statements. The added value of the article is the detection of the use of creative accounting in a specific sector, which makes the study original in its application and space-time orientation.

Keywords: Beneish model; creative accounting; earnings management; ROC curve (search for similar items in EconPapers)
JEL-codes: M00 M21 M41 M42 P34 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:pes:ierequ:v:17:y:2022:i:2:p:481-510

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