Earnings management and voluntary disclosure of management's responsibility for the financial reports

Prapaporn Kiattikulwattana

Asian Review of Accounting, 2014, vol. 22, issue 3, 233-256

Abstract: Purpose - – The purpose of this paper is to investigate the relationship between voluntary disclosure of a statement of management's responsibility for the financial reports (MRF) and earnings management, both accrual and real earnings management, in firms listed on the Stock Exchange of Thailand (SET). Design/methodology/approach - – The samples in this study are selected from listed companies on the SET in the year 2009. The multiple regression are used to test hypotheses. Findings - – The results show that the inclusion of a MRF has no association with both discretionary accrual and real earnings management activities (i.e. sales manipulation, a decrease in discretionary expenditures, and overproduction). The findings from the study reveal that firms with or without the MRF manipulate their earnings in a similar manner. Research limitations/implications - – The sample for the study includes Thai listed firms in the year 2009 only. The small sample size may limit the validity of generalizations from these conclusions. Practical implications - – Based on the results, the regulators will know that the voluntary disclosure of management responsibilities on the financial reports is an ineffective tool to control earnings management. Social implications - – Like Sarbanes-Oxley Act 2002, a disclosure of management responsibilities on the financial reports should be required by the Securities and Exchange Commission of Thailand. Originality/value - – Investors will know that firms with or without the MRF manipulate their earnings in a similar manner. The voluntary disclosure of an MRF in Thailand does not guarantee earnings quality.

Keywords: Earnings management; Real earnings management; Voluntary disclosure of management's responsibility for the financial reports; Accrual-based earnings management (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:arapps:v:22:y:2014:i:3:p:233-256

DOI: 10.1108/ARA-11-2013-0075

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