 Earnings Management in Business Groups: Tax Incentives or Expropriation Concealment?Christof Beuselinck and Marc Deloof The International Journal of Accounting, 2014, vol. 49, issue 1, 27-52 Abstract: This study provides evidence that Belgian firms affiliated to a business group (holding) manage their earnings more than stand-alone firms. Earnings management is especially more prevalent in fully owned group firms compared to group firms with minority shareholders. This evidence is consistent with the hypothesis that controlling shareholders face fewer constraints to manage earnings if opportunistic earnings management cannot adversely affect the value of minority shareholders and is inconsistent with the claim that group firms would engage in earnings management to hide controlling shareholders' self-serving transactions. On the incentive part, we find that group firms strategically manage earnings in response to tax incentives. More specifically, we show that signed discretionary accruals of group firms depend significantly more on the marginal tax rate status of the firm as compared to independent firms. Finally, we document that earnings management is particularly facilitated through intra-group transactions. Keywords: Business groups; Earnings management; Marginal tax rate; Ownership structure (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:accoun:v:49:y:2014:i:1:p:27-52 DOI: 10.1016/j.intacc.2014.01.008 Access Statistics for this article The International Journal of Accounting is currently edited by A. R. Abdel-Khalik More articles in The International Journal of Accounting from Elsevier |
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