 Earnings Management in Response to the Introduction of the Australian Gold Tax*Reza M. Monem Contemporary Accounting Research, 2003, vol. 20, issue 4, 747-774 Abstract: Earnings from gold mining in Australia remained tax†exempt for almost seven decades until January 1, 1991. In the early 1980s, rapid economic prosperity induced by escalated gold prices brought the Australian gold†mining industry under intense political scrutiny. Using a variant of the modified Jones model, this paper provides evidence of significant downward earnings management by Australian gold†mining firms, which is consistent with their attempts to mitigate political costs during the period from June 1985 to May 1988. In contrast, test of earnings management over a similar period in a control sample of Canadian gold†mining firms produced insignificant results. Further, empirical results are robust to several sensitivity tests performed. During the period from June 1988 to December 1990, the Australian firms were found to have engaged in economic earnings management. This is consistent with the sample firms' incentive of maximizing economic earnings immediately prior to the introduction of income tax on gold mining. The findings of this study help to understand the impact of earnings management on the efficient resource allocation in an economy. They also contribute toward understanding the linkage between regulation of accounting for special purposes and general†purpose financial reporting. Date: 2003 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:coacre:v:20:y:2003:i:4:p:747-774 Access Statistics for this article More articles in Contemporary Accounting Research from John Wiley & Sons |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.