Predictors of revenue shifting and expense shifting: Evidence from an emerging economy

Manish Bansal, Ashish Kumar, Asit Bhattacharyya and Hajam Abid Bashir

Journal of Contemporary Accounting and Economics, 2023, vol. 19, issue 1

Abstract: Prior literature established that managers engage in Revenue Shifting (RS) and Expense Shifting (ES) with an intent to report favourable operating performance; our paper extends such research in a new direction by investigating both forms based on the need, ease, and advantage of each form of shifting strategy. The study identifies firm-specific factors that incentivize firms to prefer RS over ES and vice-versa. We undertake a longitudinal study (2001–2019) using a sample size of 39,634 firm-years, enlisted in the Bombay Stock Exchange (BSE). Our results show that peer-performance, size, financial leverage, growth opportunities, accounting flexibility, and age of the firm are important determinants of RS and ES. Specifically, our results exhibit that large, levered, old, and high-growth firms are engaged in RS, whereas small, young, firms with lesser accounting flexibility, and firms operating below peer-performance are involved in ES. These results are robust to controlling for accruals earnings management, real earnings management, endogeneity, self-selection bias, and alternative measures of RS and ES. Our findings are helpful to auditors and investors in improving awareness of forms of classification shifting.

Keywords: Classification shifting; Earnings management; Revenue shifting; Expense shifting (search for similar items in EconPapers)
JEL-codes: M41 M48 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1815566922000340
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:19:y:2023:i:1:s1815566922000340

DOI: 10.1016/j.jcae.2022.100339

Access Statistics for this article

Journal of Contemporary Accounting and Economics is currently edited by Agnes C.S. Cheng, P. Clarkson, F.A. Gul, Zoltan Matolcsy, Dan Simunic and Ben Srinidhi

More articles in Journal of Contemporary Accounting and Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().