Factors determining earnings management to avoid losses in Polish public companies

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Factors determining earnings management to avoid losses in Polish public companies

Journal Title: Zeszyty Teoretyczne Rachunkowości - Year 2012, Vol 2012, Issue 65

Abstract

The aim of the paper is to verify the hypothesis that earnings management to avoid losses is deter-mined by economic situation. The sample consisted of 2229 observations taken from consolidated financial statements of Polish listed companies for the period 1997–2010. The distribution of yearly values of net income and cash flow from operating activity scaled by beginning of the year total assets were analyzed. The results do not give reason to reject the hypothesis that the extent of earnings management is determined by the economic situation. When the situation is good earning management is not necessary. In the case of hard economic conditions earnings management helps to report values of income desired by managers. The research has also shed some new light on the problem of management of cash flow from operations to avoid negative values. It seems that such a phenomenon appears only in the periods of bad situation, together with earnings management. This result should be interpreted carefully because of its sensitivity to the research methodology. It is the starting point for further research in the area of real earnings management.

Authors and Affiliations

Piotr Wójtowicz

Keywords

kształtowanie wyniku finansowego sprawozdanie finansowe zysk netto koniunktura gospodarcza earnings management financial statement net income economic situation

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EP ID EP69280
DOI -
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