Droughts and big baths of Australian agricultural firms

Pamela Kent, Reza Monem and Glenn Cuffe

Pacific Accounting Review, 2008, vol. 20, issue 3, 215-233

Abstract: Purpose - The purpose of this paper is to examine whether Australian agricultural firms display big bath behaviour during droughts by recognising extraordinary and abnormal losses. It is hypothesised that Australian agricultural firms are more likely to report big bath losses in drought years than in non‐drought years and, in a given drought year, agricultural firms are more likely to report big bath losses than firms in other industries. Design/methodology/approach - The authors analyse 405 firm‐years data for agricultural firms over 1980‐1995. For comparison, they also analyse matched‐pair samples of 17 and 30 non‐agricultural firms for the drought years of 1983 and 1995, and matched‐pair samples of 19 non‐agricultural firms for the non‐drought years of 1986 and 1990, respectively. Both univariate and multivariate analyses are used to test the hypotheses. Findings - It is found that agricultural firms are more likely to take big baths in drought years than in non‐drought years. Further, in a given drought year, agricultural firms are more likely to take big baths than non‐agricultural firms. Further analyses of sales, profitability, and extraordinary and abnormal items support the idea that big baths reflect managerial opportunism rather than the economic consequences of droughts. Originality/value - Previous studies have not investigated the impact of natural calamities like flood and drought on accounting choices. This paper makes an original contribution to the accounting literature by documenting evidence on the extent to which an act of nature, over which management has little or no control, can influence accounting choices.

Keywords: Common Agricultural Policy; Natural disasters; Australia (search for similar items in EconPapers)
Date: 2008
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)
Access to full text is restricted to subscribers

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:parpps:01140580810920218

DOI: 10.1108/01140580810920218

Access Statistics for this article

Pacific Accounting Review is currently edited by Professor Tom Scott, Dr Pei-Chi Kelly Hsiao, Associate Professor Chelsea Liu, Associate Professor Sophia Su, Associate Professor Thu Phuong Truong and Dr Lily Chen

More articles in Pacific Accounting Review from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().