The Short Term Earnings Management Ethic and Its Effect on Accounting Education and Corporate Perceptions

Siti Arifah; Aditya Rizki Nugraha

doi:10.69725/aai.v1i1.89

Authors

Siti Arifah Accounting Department, Faculty of Economics, Universitas Tidar, Magelang, Indonesia
Aditya Rizki Nugraha Master of Accounting, Faculty of Economics & Business, Soegijapranata Catholic University, Semarang, Indonesia

DOI:

https://doi.org/10.69725/aai.v1i1.89

Keywords:

Earnings Management, Financial Accounting Ethics, Gender Differences, Perceptions of Financial Practices, Regulatory Frameworks

Abstract

Objective: This study explores how students and company managers view earnings management strategies, with a particular emphasis on the moral and ethical aspects. It also looks at how these views differ according to gender. Enhancing knowledge of ethical behavior in financial reporting is the goal, and it will also guide future investigations and legislative actions.
Methods: A structured questionnaire consisting of twenty items with ratings on a five-point Likert scale was used in a descriptive research design. There were 700 participants in the sample, 150 of whom were business managers and the remaining 550 were students from Indonesian universities. To evaluate variations based on group and gender, distribution of frequencies, means, and ANOVA were used to examine the data.
Findings: Findings show that opinions of earnings management techniques varied significantly between the sexes, with men typically viewing aggressive tactics with less leniency. The study revealed that activities having more financial consequences, such as postponing costs or adjusting reserves, are subject to more scrutiny. Relationships between gender and behavior are consistent with contemporary empirical data and theoretical models such as the Concept of Planned Behavior.
Novelty: This research adds to the current conversation about the ethics of finance and the effectiveness of regulatory regimes by offering fresh perspectives on the ways in which gender and certain earnings management techniques affect moral reasoning.
Theory and Policy Implications: The results emphasize the necessity of customized ethical education and policy modifications to tackle gender disparities in perspectives. Future studies on the relationship between gender, organizational culture, and financial ethics should be conducted in order to provide more useful ethical guidelines and procedures for financial reporting.

Downloads

Download data is not yet available.

Author Biographies

Siti Arifah, Accounting Department, Faculty of Economics, Universitas Tidar, Magelang, Indonesia

Dr. Siti Arifah, S.E., M.Si
Accounting Department, Faculty of Economics, Universitas Tidar, Magelang, Indonesia
Aditya Rizki Nugraha, Master of Accounting, Faculty of Economics & Business, Soegijapranata Catholic University, Semarang, Indonesia

Aditya Rizki Nugraha, SE., M.Ak
Master of Accounting, Faculty of Economics & Business, Soegijapranata Catholic University, Semarang, Indonesia

References

Acemoglu, Daron, Simon Johnson, and James A. Robinson. 2005. “Chapter 6 Institutions as a Fundamental Cause of Long-Run Growth.” Pp. 385–472 in Vol. 1, edited by P. Aghion and S. N. B. T.-H. of E. G. Durlauf. Elsevier.

Aggarwal, Reena, Jason D. Schloetzer, and Rohan Williamson. 2019. “Do Corporate Governance Mandates Impact Long-Term Firm Value and Governance Culture?” Journal of Corporate Finance 59:202–17. doi: https://doi.org/10.1016/j.jcorpfin.2016.06.007.

Alharbi, Rana, Marwa Elnahass, and Josie McLaren. 2022. “Women Directors and Market Valuation: What Are the ‘Wonder Woman’ Attributes in Banking?” Journal of International Financial Markets, Institutions and Money 80:101611. doi: https://doi.org/10.1016/j.intfin.2022.101611.

Bansal, Manish. 2023. “Earnings Management: A Three-Decade Analysis and Future Prospects.” Journal of Accounting Literature ahead-of-print(ahead-of-print). doi: 10.1108/JAL-10-2022-0107.

Bassemir, Moritz, and Zoltán Novotny-Farkas. 2018. “IFRS Adoption, Reporting Incentives and Financial Reporting Quality in Private Firms.” Journal of Business Finance & Accounting 45(7–8):759–96. doi: https://doi.org/10.1111/jbfa.12315.

Beck, Cornelia, John Dumay, and Geoffrey Frost. 2017. “In Pursuit of a ‘Single Source of Truth’: From Threatened Legitimacy to Integrated Reporting.” Journal of Business Ethics 141(1):191–205. doi: 10.1007/s10551-014-2423-1.

Boachie, Christopher, and Emmanuel Mensah. 2022. “The Effect of Earnings Management on Firm Performance: The Moderating Role of Corporate Governance Quality.” International Review of Financial Analysis 83:102270. doi: https://doi.org/10.1016/j.irfa.2022.102270.

Bonaiuto, Marino, Susana Alves, Stefano De Dominicis, and Irene Petruccelli. 2016. “Place Attachment and Natural Hazard Risk: Research Review and Agenda.” Journal of Environmental Psychology 48:33–53. doi: https://doi.org/10.1016/j.jenvp.2016.07.007.

Brooks, Chris, and Ioannis Oikonomou. 2018. “The Effects of Environmental, Social and Governance Disclosures and Performance on Firm Value: A Review of the Literature in Accounting and Finance.” British Accounting Review 50(1):1–15. doi: 10.1016/j.bar.2017.11.005.

Chen, Jiandong, Douglas Cumming, Wenxuan Hou, and Edward Lee. 2013. “Executive Integrity, Audit Opinion, and Fraud in Chinese Listed Firms.” Emerging Markets Review 15:72–91. doi: https://doi.org/10.1016/j.ememar.2012.12.003.

Chen, Linda H., Jeffrey Gramlich, and Kimberly A. Houser. 2019. “The Effects of Board Gender Diversity on a Firm’s Risk Strategies.” Accounting & Finance 59(2):991–1031. doi: https://doi.org/10.1111/acfi.12283.

Chen, Xia, Qiang Cheng, Ying Hao, and Qiang Liu. 2020. “GDP Growth Incentives and Earnings Management: Evidence from China.” Review of Accounting Studies 25(3):1002–39. doi: 10.1007/s11142-020-09547-8.

Datta, Sudip, Trang Doan, and Francesca Toscano. 2021. “Top Executive Gender, Board Gender Diversity, and Financing Decisions: Evidence from Debt Structure Choice.” Journal of Banking & Finance 125:106070. doi: https://doi.org/10.1016/j.jbankfin.2021.106070.

Dechow, Patricia M., Chad R. Larson, and Robert J. Resutek. 2022. “The Effect of Accrual Heterogeneity on Accrual Quality Inferences.” The Accounting Review 97(5):245–73. doi: 10.2308/TAR-2019-0200.

Dichev, Ilia D., John R. Graham, Campbell R. Harvey, and Shiva Rajgopal. 2012. “Earnings Quality: Evidence from the Field.” Journal of Accounting and Economics 56(2–3):1–33. doi: 10.1016/j.jacceco.2013.05.004.

Ding, Rong, Mingzhi Liu, Tingting Wang, and Zhenyu Wu. 2021. “The Impact of Climate Risk on Earnings Management: International Evidence.” Journal of Accounting and Public Policy 40(2):106818. doi: https://doi.org/10.1016/j.jaccpubpol.2021.106818.

Dobija, Dorota, and Karol Marek Klimczak. 2010. “Development of Accounting in Poland: Market Efficiency and the Value Relevance of Reported Earnings.” The International Journal of Accounting 45(3):356–74. doi: https://doi.org/10.1016/j.intacc.2010.06.010.

García-Meca, Emma, and Isabel-María García-Sánchez. 2018. “Does Managerial Ability Influence the Quality of Financial Reporting?” European Management Journal 36(4):544–57. doi: https://doi.org/10.1016/j.emj.2017.07.010.

García Lara, Juan Manuel, Beatriz García Osma, and Fernando Penalva. 2020. “Conditional Conservatism and the Limits to Earnings Management.” Journal of Accounting and Public Policy 39(4):106738. doi: https://doi.org/10.1016/j.jaccpubpol.2020.106738.

García Osma, Beatriz, Jacobo Gomez-Conde, and Ernesto Lopez-Valeiras. 2022. “Management Control Systems and Real Earnings Management: Effects on Firm Performance.” Management Accounting Research 55:100781. doi: https://doi.org/10.1016/j.mar.2021.100781.

Giacomino, Don E., Jill Brown, and Michael D. Akers. 2011. “Generational Differences Of Personal Values Of Business Students.” American Journal of Business Education (AJBE) 4(9):19–30. doi: 10.19030/ajbe.v4i9.5616.

Gull, Ammar Ali, Mehdi Nekhili, Haithem Nagati, and Tawhid Chtioui. 2018. “Beyond Gender Diversity: How Specific Attributes of Female Directors Affect Earnings Management.” The British Accounting Review 50(3):255–74. doi: https://doi.org/10.1016/j.bar.2017.09.001.

Harjoto, Maretno A., Indrarini Laksmana, and W. Eric Lee. 2020. “Female Leadership in Corporate Social Responsibility Reporting: Effects on Writing, Readability and Future Social Performance.” Advances in Accounting 49:100475. doi: https://doi.org/10.1016/j.adiac.2020.100475.

Harris, N. L., S. C. Hagen, S. S. Saatchi, T. R. H. Pearson, C. W. Woodall, G. M. Domke, B. H. Braswell, B. F. Walters, S. Brown, W. Salas, A. Fore, and Y. Yu. 2016. “Attribution of Net Carbon Change by Disturbance Type across Forest Lands of the Conterminous United States.” Carbon Balance and Management 11(1):24. doi: 10.1186/s13021-016-0066-5.

Jensen, Michael C., and William H. Meckling. 2019. “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” Corporate Governance: Values, Ethics and Leadership 77–132. doi: 10.4159/9780674274051-006.

Kuo, Ya-Fen, Yi-Mien Lin, and Hsiu-Fang Chien. 2021. “Corporate Social Responsibility, Enterprise Risk Management, and Real Earnings Management: Evidence from Managerial Confidence.” Finance Research Letters 41:101805. doi: https://doi.org/10.1016/j.frl.2020.101805.

Liu, Qingbai, Chuanjie Wang, Ping Zhang, and Kaixin Zheng. 2021. “Detecting Stock Market Manipulation via Machine Learning: Evidence from China Securities Regulatory Commission Punishment Cases.” International Review of Financial Analysis 78:101887. doi: https://doi.org/10.1016/j.irfa.2021.101887.

Lukka, Kari, and Marc Wouters. 2022. “Towards Interventionist Research with Theoretical Ambition.” Management Accounting Research 55(February):100783. doi: 10.1016/j.mar.2022.100783.

Marra, Antonio, Pietro Mazzola, and Annalisa Prencipe. 2011. “Board Monitoring and Earnings Management Pre- and Post-IFRS.” The International Journal of Accounting 46(2):205–30. doi: https://doi.org/10.1016/j.intacc.2011.04.007.

Montenegro, Tânia Menezes, and Lúcia Lima Rodrigues. 2020. “Determinants of the Attitudes of Portuguese Accounting Students and Professionals Towards Earnings Management.” Journal of Academic Ethics 18(3):301–32. doi: 10.1007/s10805-020-09376-z.

Preuss, Susanne, and Roland Königsgruber. 2021. “How Do Corporate Political Connections Influence Financial Reporting? A Synthesis of the Literature.” Journal of Accounting and Public Policy 40(1):106802. doi: https://doi.org/10.1016/j.jaccpubpol.2020.106802.

Rockness, Howard, and Joanne Rockness. 2005. “Legislated Ethics: From Enron to Sarbanes-Oxley, the Impact on Corporate America.” Journal of Business Ethics 57(1):31–54. doi: 10.1007/s10551-004-3819-0.

Ross L. Watts, and Jerold L. Zimmerman. 1990. “Positive Accounting Theory: A Ten Year Perspective.” The Accounting Review 65(1):131–56.

Schumann, Felix, Toni W. Thun, Tobias Dauth, and Henning Zülch. 2024. “Does Top Management Team Diversity Affect Accounting Quality? Empirical Evidence from Germany.” Journal of Management and Governance 28(1):137–75. doi: 10.1007/s10997-023-09668-7.

Stolowy, Hervé, and Gaétan Breton. 2004. “Accounts Manipulation: A Literature Review and Proposed Conceptual Framework.” Review of Accounting and Finance 3(1):5–92. doi: 10.1108/eb043395.

Sun, Nan, Aly Salama, Khaled Hussainey, and Murya Habbash. 2010. “Corporate Environmental Disclosure, Corporate Governance and Earnings Management.” Managerial Auditing Journal 25(7):679–700. doi: 10.1108/02686901011061351.

Valentine, Sean, and Lynn Godkin. 2019. “Moral Intensity, Ethical Decision Making, and Whistleblowing Intention.” Journal of Business Research 98:277–88. doi: https://doi.org/10.1016/j.jbusres.2019.01.009.

Wagener, Sebastian. 2024. “Accounting for the Middle: Motivations, Extent, and Limitations of Middle Managers’ Earnings Management.” Journal of Business Economics 94(2):225–77. doi: 10.1007/s11573-023-01162-8.

Wan, Jiaxin, Wanrong Ma, and Chunxiao Mao. 2024. “Navigating Economic and Legal Compliance in Digital Resource Management: Technological Pathways to Sustainability with Digital Government.” Resources Policy 95:105110. doi: https://doi.org/10.1016/j.resourpol.2024.105110.

Wang, Qili, Wei Xu, Xinting Huang, and Kunlin Yang. 2019. “Enhancing Intraday Stock Price Manipulation Detection by Leveraging Recurrent Neural Networks with Ensemble Learning.” Neurocomputing 347:46–58. doi: https://doi.org/10.1016/j.neucom.2019.03.006.

Weber, James, and Akwasi Opoku-Dakwa. 2022. “Ethical Work Climate 2.0: A Normative Reformulation of Victor and Cullen’s 1988 Framework.” Journal of Business Ethics 178(3):629–46. doi: 10.1007/s10551-021-04778-4.

Wheeler, Brandan E., and Cecilia Brooks. 2023. “Financial Concerns, Relationship Happiness, and Financial Management Behaviors: A Moderating Relationship Among Married and Cohabiting Respondents.” Journal of Family and Economic Issues 44(2):325–41. doi: 10.1007/s10834-022-09824-5.

Wilson, Dana Burdnell, Terry A. Solomon, and Denise McLane-Davison. 2020. “Ethics and Racial Equity in Social Welfare Policy: Social Work’s Response to the COVID-19 Pandemic.” Social Work in Public Health 35(7):617–32. doi: 10.1080/19371918.2020.1808145.

Wilson, Mark, Kun Tracy Wang, Yue Wu, and Archie Lau. 2022. “Institutional Investors and Earnings Management Associated with Controlling Shareholders’ Promises: Evidence from the Split Share Structure Reform in China.” Journal of Contemporary Accounting & Economics 18(3):100330. doi: https://doi.org/10.1016/j.jcae.2022.100330.

Zhang, Ivy Xiying. 2007. “Economic Consequences of the Sarbanes–Oxley Act of 2002.” Journal of Accounting and Economics 44(1):74–115. doi: https://doi.org/10.1016/j.jacceco.2007.02.002.

Zou, Lili Wenli, and Ricky Y. K. Chan. 2019. “Why and When Do Consumers Perform Green Behaviors? An Examination of Regulatory Focus and Ethical Ideology.” Journal of Business Research 94:113–27. doi: https://doi.org/10.1016/j.jbusres.2018.04.006.