Does the UK Companies Act of 2006 matter for the private companies? Evidence from real and accruals earnings management practices

Bilal Ahmad Elsalem, Fekri Ali Shawtari, Ahmad Mohammed Qotba, Mohammed Bajaher and Mohammed Asseri

Journal of Money and Business, 2023, vol. 3, issue 2, 212-226

Abstract: Purpose - The purpose of this study is to examine both accruals and real earnings management in a large sample of private companies in the UK using data from 2002 to 2009 following the implementation of the UK Act of 2006. Design/methodology/approach - A panel data analysis using GMM has been adopted to examine the objectives of the study and answer the research questions. Findings - The results of this study showed that the imposition of the Companies Act of 2006, on its own, did lead to changes in earnings management behaviour, in both accruals-based earnings and real earnings management. Moreover, this study also found that firms that chose to provide IFRS financial statements tended to show less discretionary earnings management, however, it tended to have no impact on real earnings management. Practical implications - In accordance with the research findings, standard setters with some insight tend to determine how capital markets see the information provided under the legislation such as the UK Act of 2006 in developed countries and thereby ensure long-term sustainability in a modern and sophisticated financial world. This study provides an insight into the successful implementation of the UK act of 2006, and its influence on the aspect of financial reporting. Originality/value - The novel conclusion reached in the study is that there exists a strong and direct link between the smooth implementation of UK Act of 2006 and the practices of both accruals and real earnings management in real-world business and financial scenarios, particularly, in private companies.

Keywords: Earnings management; Discretionary accruals; Real earnings; UK Companies Act; IFRS; Private companies (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)

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:eme:jmbpps:jmb-01-2023-0006

DOI: 10.1108/JMB-01-2023-0006

Access Statistics for this article

Journal of Money and Business is currently edited by Professor Abderrazak Laghouag

More articles in Journal of Money and Business from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().