We propose a generalized, practitioner-oriented operating leverage model for predicting operating income using Standard and Poor’s Compustat items: SALE (net sales), COGS (cost of sales), DP (total depreciation and amortization), XSGA (selling, general, and administrative expenses), and OIADP (operating income after depreciation and amortization). Prior research finds that OIADP = SALE - COGS - DP - XSGA; hence, our model includes all aggregate revenues and expenses comprising OIADP. Also, prior research finds COGS is “much less” sticky than DP and XSGA; hence, we use COGS as a proxy for total variable costs and DP and XSGA as proxies for sticky fixed costs. We introduce a new adjustment to the textbook operating leverage model so that SALE-to-COGS remains constant for the reference and forecast periods. Also, inspired by prior research, we introduce adjustments to DP and XSGA for cost stickiness. We find our generalized operating leverage model improves estimates of changes in next-quarter and next-year OIADP compared to textbook operating leverage predictions, which are special cases of our model.

This study investigates the impact of governance variables on the earnings quality based on the industry the firm is in. it has been identified that earnings management have been practised differently by different industries. Most of the research under earnings management have focussed on holistic impacts of corporate governance variables on discretionary accruals while this study has categorised the firms based on what industry they fall on while identifying the impacts of the variables of corporate governance on discretionary accruals. Initially, this paper has studied the estimation of the value of discretionary accruals and identified that performance matched discretionary accruals as the best model as per the explanatory power of the model is higher than other models. Hence, the estimation of the earnings management has been calculated based on performance matched discretionary accruals in this research. This research has studied the impacts of the governance attributes on the earnings management categorising the firms based on the industry they are in; hence, the value of earnings management has been categorically separated; hereafter, the impact of the corporate governance factors on the value of categorically separated earnings management have been statistically analysed. This study has considered the descriptive study to compare the means, medians and standard deviations of the earnings management of various industries. Moreover, Pearson correlations and Spearman rank correlation have been used as a research tool to examine the correlation coefficients.

This paper investigates the role of English language proficiency (ELP) as a measure of cultural integration on U.S. immigrant families’ economic integration, as measured by annual earnings, and health care market integration, as captured by annual medical care spending. Bayesian Markov Chain Monte Carlo (MCMC) estimation of a mixed bivariate ordered probit (MBOP) model of annual earnings and medical care spending is conducted using a nationally representative pooled cross-sectional sample data from the U.S. National Health Interview Surveys (NHIS). The results reveal that limited English proficiency is associated with lower marginal earnings propensities (-$44.83, -$50.66, and -$56.97), and higher marginal medical care spending propensities ($8.09, $6.09, and $4.32) for each of the three decreasing levels of ELP. Furthermore, we find a small yet statistically significant positive 7.2% correlation between immigrant families’ annual earnings and medical care spending propensities. Therefore investing to raise immigrants’ families ELP in the U.S. would not only contribute to more effective socio-economic integration, but also strengthen the U.S. workforce and economy for decades to come.

This study examines whether information about the winners of the Sustainability Reporting Award (SRA) contributes to the usefulness of the information in the financial statements. This study used a sample consisting of 110 winners of SRA (SRA firms) and 110 companies that did not receive SRA (non-SRA firms) from 2008 to 2016. The study found that earnings per share (EPS), book value per share (BVPS), and earnings per share change (EPSC) are value relevant information. Results of comparison between SRA firms and non-SRA fimrs, this study found that EPS positive association with stock price and with returns for SRA firms is higher than that for non-SRA firms. Findings of this study also show that, value relevance of BVPS for non-SRA firms is higher than that for SRA firms. When mesures of Price and BVPS are transformed into natural logarithm, the value relevance of BVPS for SRA firms is higher than that for non-SRA firms. Thus, the results are sensitive to measures of the variables. The findings of this study indicate that information about the winners of SRA contributes to the usefulness of financial statements.

In Norway, 78% of publicly funded general practitioners (GPs) are self-employed, remunerated through a mix of capitation and fee-for-service, while 22 % are salaried. GPs register consultations and procedures using nationally standardized fees for health services, which allows for variations in earnings. Our study aims to examine whether high and low earning GPs also differ in their earnings per list patient and, if so, identify the specific fees that contribute to this difference. Additionally, we aim to compare practice characteristics between high and low earning GPs. We analyse national registry data from 2021 for all GPs with at least 100 working days (N=2546) and calculate annual earnings from capitation and fees. High earning GPs (upper quartile) have 55% more listed patients than low earning GPs (lower quartile), yet they earn 40% more from fees per patient (average €178 versus €127). Nearly half of the earnings difference per patient can be attributed to high earning GPs more frequently conducting consultations with patients. Still, patients of high earning GPs receive less minutes in consultations yearly (average 35 versus 38 min), due to high earners’ shorter consultation duration (average 15 versus 20 min). The remaining earning difference comes from higher utilization of procedure fees among high earners (average 5.6 versus 3.9 procedures per patient). Prolonged consultation, medication review, and talking therapy are some of the fees that contribute most to this difference. The findings highlight that considerable earning variations are linked to fee utilization and practice styles among GPs.

The main issues of accounting reporting regarding goodwill are whether a firm’s management reliably conveys their private information about future earnings, and whether they disclose value-relevant and useful information to accounting users. In the current International Financial Reporting Standards (IFRS) regulations, the goodwill impairment test is based on management’s discretionary assessments. This study examines how goodwill impairment is reported under IFRS considering company- and industry-specific economic factors, proxies for earnings management, and macroeconomic crisis years. We extend previous research using Tobit and Logit regression, by employing a fixed-effects model. This approach is possible because of a panel data set comprising 449 of 600 active companies sampled from the STOXX Europe 600 index from 2005 to 2018. We find that goodwill impairments are largely concentrated in certain companies, industries, and years. The regression models show a significant negative correlation between companies’ return on total assets and goodwill impairments. Moreover, we discover that goodwill impairments have a significant positive correlation with goodwill intensity, debt ratio, and the proxy for reporting a one-off big bath charge. In addition, we find that the global financial crisis in 2008-2009 and the European debt crisis in 2011 differ significantly from other fiscal years

We examined the causality between growth opportunities and earnings quality of the emerging economies. We develop an argument that growth opportunities should lead to high-quality earnings of the developing economies against the prior studies from developed economies which posit that growth opportunities result in a lower quality of earnings. The findings revealed that Growth Opportunities had a positive significant effect on Earnings Quality (EQ). Thus, the study concluded that growth opportunities are useful in determining the earnings quality of firms. The study recommends that managers should take advantage of their firms' growth opportunities to provide quality accounting information which will directly provide expanded opportunities for business growth. Though literature confirms that generally, earnings management might not be necessarily bad in business operational practice, managers are advised to avoid extreme aggressiveness in managing earnings as this may culminate in the negative manipulation of accounting information.

Prior research has extensively examined the relationship between religion and accrual-based earnings management. However, there is currently little research in the relationship between religion and real (non-accrual) earnings management, especially in Europe. This paper aims to fill this research gap and examines whether and how the effect of religion could be linked with firms’ real earnings management activities. Four hypotheses are developed and tested with our results providing indications that the degree of overall religiosity is negatively and significantly associated with real earnings management. Furthermore, when investigating the effects of different religions in Europe, Christianity and Islam have the opposite impact on firms’ real earnings management activities. Overall, our paper indicates that in European countries, the religious environment can mitigate firms’ manipulations on earnings.

Earnings management and financial distress are two critical facets of financial management in corporations that have lately been the focus of thorough research from both scholars and practitioners. The purpose of the research is to evaluate the influence of financial distress on the earnings management of companies listed at the NSE during the pre- and post-COVID eras. Multiple linear regression was applied in this study to examine the causal association between earnings management and financial distress. To assess the effect of financial distress on earnings management, the study analyzed data from 37 listed companies during the pre-COVID and post-COVID periods. The methodology also takes into account control factors like firm size, GDP, and inflation. The pre-COVID research indicates a significant positive correlation between financial strain and earnings management. In contrast, the correlation between financial distress and earnings management is not statistically significant in the post-COVID analysis. However, research shows that firm size has a statistically significant negative influence on managing earnings. The results of this study show that smaller firms are more inclined to engage in earnings management during the post-COVID era than bigger ones.

Derivatives products have become essential in portfolio diversification, price discovery and risk hedging. Derivatives are complex instruments; their role is twofold, risk management and speculation, and their actual Impact on the underlying assets’ behaviours are not well understood. Little is documented empirically on how these instruments’ two-edged roles influence firms’ financing decisions, firm risk exposures, and stability. Given the growing interest in using derivatives in risk management and portfolio engineering, this study examines the practical impact of derivatives usage on the underlying firm’s financing policy and stability. The paper uses data from South African listed non-financial firms for the period 2000 to 2019. The study employs a dynamic panel model estimated with System Generalised Methods of Moments (GMM). The initial analysis shows that derivatives use reduces the cost of capital and increases firm stability. However, further in-depth analysis provides evidence that extensive use of derivatives increases firms’ capital costs and negatively impacts financial stability. These findings imply that the risk embedded in derivatives’ speculation dominates their risk management function. The results are subjected to numerous controls for robustness, including financial leverage, firm size, cashflows and asset tangibility.

This article delves into the pro-cyclicality of Loan Loss Provisions (LLPs) and earnings management, along with equity management, in Portuguese banks against the backdrop of implementing the IFRS 9's Expected Credit Loss (ECL) model. It concentrates on how LLPs mirror economic cycles and financial management practices, providing valuable insights into the operational dynamics of the Portuguese banking sector, marked by distinct economic and regulatory challengesThe research examined a sample of five Portuguese commercial banks, chosen from a group of seventeen in the Portuguese Banking Association. Data spanning from 2013 to 2022 were manually gathered. A multiple linear regression model was employed to scrutinize the relationship between LLPs and variables indicative of economic cycles and the earnings and equity management. The methodology aligns with the approaches of Araújo et al. (2018), Beatty and Liao (2014), and Casta et al. (2019). The analysis indicates a pro-cyclicality in LLPs within the Portuguese context, with a positive response of LLPs to economic indicators like unemployment. Contrarily, the extent of earnings and equity management under the ECL model was less marked compared to the Incurred Credit Loss (ICL) model, suggesting the impact of more stringent regulatory measures. The research corroborates the pro-cyclicality of LLPs in Portuguese banks under the ECL framework, underscoring the necessity for ongoing monitoring and refinement of models for forecasting and recognizing credit losses. The findings point to an area for improvement in financial management practices, despite regulatory enhancements, to promote transparency and ensure financial stability.

In light of the worldwide spreading requirements related to the disclosure of non-financial information, which are aligning to the Sustainable Development Goals (SDGs) developed by the United Nations (UN) in 2015, the study aims to analyse the influence of sustainability and other non-financial reporting on companies’ engagement in earnings management practices, through a pre-post adoption of European Directive 2014/95/EU comparative analysis for firms listed on the Bucharest Stock Exchange (BSE) in the period 2015-2019. To conduct the investigation, the research involves the assessment and analysis of three earnings management metrics resulted by running multiple linear regression models on a sample of 31 companies listed on BSE. Research findings emphasise a decrease in the use of income smoothing practices by sampled companies in the post-adoption period 2017-2019, compared to the period preceding the implementation of the EU directive related to mandatory disclosure of non-financial information, 2015-2016. Thus, firms characterised by a higher transparency in terms of sustainability reporting are less inclined to engage in earnings management practices. This research complements the literature in the field of sustainability reporting and earnings management, providing empirical evidence on the significance and impact of publishing non-financial information.

This research aims to investigate and conduct the impact of earnings management practices on the performance of the banking sector in Jordan. Data were collected from 24 main commercial banks from (2015 – 2021). The study examine how earnings management practices affect banking sector performance using debt ratios and equity ratios based on firm size and debt ratios, and measure the impact of earnings management on it using regression analysis. The result of the study reveal that a positive and statistically significant association between equity per share (EPS) and return on investment (ROI) with earnings management practices, also, earnings management techniques are positively and significantly impacted by return on equity (ROE), the hypothesis that returns on investment (ROI) encourage business managers to employ earnings management strategies. Also, the study show that dependent variables of earnings management is measured as a debt ratio and equity ratio. Variables that are independent or explanatory of earnings management are considered independent variables.