Detecting earnings management in a Spanish context

Mar¡a del Mar Delgado Hurtado (mdelgado@ubu.es) and Luis Castrillo Lara (lcastri@ubu.es)
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Mar¡a del Mar Delgado Hurtado: Departamento de Econom¡a y Administraci¢n de Empresas, Facultad de Ciencias Econ¢micas y Empresariales, Universidad de Burgos
Luis Castrillo Lara: Departamento de Econom¡a y Administraci¢n de Empresas, Facultad de Ciencias Econ¢micas y Empresariales, Universidad de Burgos

No 2001-09, Working Papers "New Trends on Business Administration". Documentos de Trabajo "Nuevas Tendencias en Dirección de Empresas". from Interuniversity Research Master and Doctorate Program (with a quality mention of ANECA) on "Business Economics", Universities of Valladolid, Burgos, Salamanca and León (Spain). Until 2008, Interuniversity Doctorate Program (with a quality mention of ANECA) “New trends in Business Administration”, Universities of Valladolid, Burgos, and Salamanca (Spain). Master en Investigación y Programa de Doctorado Interuniversitarios (con mención de calidad de la ANECA) en "Economía de la Empresa", Universidades de Valladolid, Burgos, Salamanca y León (España). Hasta 2008, Programa de Doctorado Interuniversitario (con mención de calidad de la ANECA) “Nuevas Tendencias en Dirección de Empresas”, Universidades de Valladolid, Burgos y Salamanca (España).

Abstract: The aim of this study is to examine whether different accrual models detect earnings management in a sample of Spanish firms that have received GAAP audit qualifications. The unexpected accruals obtained from the Jones model, the modified Jones model, the Jones working capital model and the modified Jones working capital model are significantly positive, supporting the hypothesis that earnings have been managed upwards. However, the unexpected accruals obtained from the margin model are not significantly positive. We should be cautious in the interpretation of these results because of the almost certainly bias towards the inclusions of the most obvious and spectacular cases of earnings management. Potential extreme financial performance bias can not be ruled out as explanation for these results. An important limitation of this paper is the reduced number of firms that constitutes the estimation sample and also the prediction sample.

Keywords: earnings management; accruals; accrual models; GAAP audit qualification. (search for similar items in EconPapers)
Pages: 28 pages
Date: 2001-12
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