IDEAS home Printed from https://ideas.repec.org/a/ers/ijebaa/vviiiy2020i4p1011-1022.html
   My bibliography  Save this article

The Moderating Role of Earnings Management on the Relationship between Cash Flow Activities and Stock Returns in the Jordanian Manufacturing Firms

Author

Listed:
  • Sinan Suleiman Abbadi

Abstract

Purpose: This study examined the moderating role of earnings management on the relationship between cash flow activities and stock returns among the Jordanian manufacturing firms. Methodology: Data was collected from 44 companies listed in Amman Stock Exchange for the period 2013-2018. The obtained data was subsequently analyzed using descriptive and multiple linear regression analysis tools of SPSS, version 27. Findings: This study observed that earnings management, computed as per the modified Jones model of 1995, among the manufacturing firms in Jordan produce no significant influence on the relationship between stock returns and the cash flow activities. Moreover, there was no significant association between cash flow activities and the firms’ stock returns. Practical implications: The findings from this study give the management of manufacturing firms more freedom to independently list their stock. Originality: This paper highlights a pragmatic dissonance between earnings management and cash flow activities and stock returns as demonstrated by the data obtained from the manufacturing firms listed in Amman stock exchange for the period 2013-2018.

Suggested Citation

  • Sinan Suleiman Abbadi, 2020. "The Moderating Role of Earnings Management on the Relationship between Cash Flow Activities and Stock Returns in the Jordanian Manufacturing Firms," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 1011-1022.
    • Handle: RePEc:ers:ijebaa:v:viii:y:2020:i:4:p:1011-1022
    as

    Download full text from publisher

    File URL: https://ijeba.com/journal/646/download
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Benjamin A. Jansen, 2020. "Cash Flow Growth and Stock Return," Working Papers 202004, Middle Tennessee State University, Department of Economics and Finance.
    2. Collins, Daniel W. & Hribar, Paul & Tian, Xiaoli (Shaolee), 2014. "Cash flow asymmetry: Causes and implications for conditional conservatism research," Journal of Accounting and Economics, Elsevier, vol. 58(2), pages 173-200.
    3. Kroes, James R. & Manikas, Andrew S., 2014. "Cash flow management and manufacturing firm financial performance: A longitudinal perspective," International Journal of Production Economics, Elsevier, vol. 148(C), pages 37-50.
    4. Ahsan Habib, 2010. "Prediction of Operating Cash Flows: Further Evidence from Australia," Australian Accounting Review, CPA Australia, vol. 20(2), pages 134-143, June.
    5. Roychowdhury, Sugata, 2006. "Earnings management through real activities manipulation," Journal of Accounting and Economics, Elsevier, vol. 42(3), pages 335-370, December.
    6. Shadi Farshadfar & Reza Monem, 2013. "The usefulness of operating cash flow and accrual components in improving the predictive ability of earnings: a re-examination and extension," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(4), pages 1061-1082, December.
    7. Bradshaw, Mark T. & Richardson, Scott A. & Sloan, Richard G., 2006. "The relation between corporate financing activities, analysts' forecasts and stock returns," Journal of Accounting and Economics, Elsevier, vol. 42(1-2), pages 53-85, October.
    8. Katherine A. Gunny, 2010. "The Relation Between Earnings Management Using Real Activities Manipulation and Future Performance: Evidence from Meeting Earnings Benchmarks," Contemporary Accounting Research, John Wiley & Sons, vol. 27(3), pages 855-888, September.
    9. Dirk Hackbarth & Rainer Haselmann & David Schoenherr, 2015. "Financial Distress, Stock Returns, and the 1978 Bankruptcy Reform Act," The Review of Financial Studies, Society for Financial Studies, vol. 28(6), pages 1810-1847.
    10. Luo, Mei, 2008. "Unusual operating cash flows and stock returns," Journal of Accounting and Public Policy, Elsevier, vol. 27(5), pages 420-429.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Saoussen Boujelben & Hela Khemakhem-Feki & Ahmad Alqatan, 2020. "Real earnings management and the relevance of operating cash flows: A study of french listed firms," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 17(4), pages 218-229, December.
    2. Seraina C. Anagnostopoulou & Andrianos E. Tsekrekos, 2017. "The effect of financial leverage on real and accrual-based earnings management," Accounting and Business Research, Taylor & Francis Journals, vol. 47(2), pages 191-236, February.
    3. Li, Chunyu & Lou, Chenxin & Luo, Dan & Xing, Kai, 2021. "Chinese corporate distress prediction using LASSO: The role of earnings management," International Review of Financial Analysis, Elsevier, vol. 76(C).
    4. Shan Lu & Peng Wu & Lei Gao & Richard Gifford, 2023. "Are State-Owned Enterprises Equally Reliable Information Suppliers? An Examination of the Impacts of State Ownership on Earnings Management Strategies of Chinese Enterprises," Mathematics, MDPI, vol. 11(4), pages 1-26, February.
    5. Yun Meng & Christos Pantzalis, 2021. "Lottery-type stocks and corporate strategies at the turn of the month," Review of Quantitative Finance and Accounting, Springer, vol. 56(3), pages 1027-1055, April.
    6. Ammar Hussain & Minhas Akbar & Muhammad Kaleem Khan & Ahsan Akbar & Mirela Panait & Marian Catalin Voica, 2020. "When Does Earnings Management Matter? Evidence across the Corporate Life Cycle for Non-Financial Chinese Listed Companies," JRFM, MDPI, vol. 13(12), pages 1-19, December.
    7. Faradisa Bachmid & Sumiati Sumiati & Siti Aisjah, 2021. "The effect of financial distress using the Altman and Springate Models on stock return in mediated earnings management:A study on textile and garment companies listed on the Indonesia Stock Exchange 2," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(5), pages 119-128, July.
    8. Nagar, Neerav & Sen, Kaustav, 2016. "Earnings management in India: Managers’ fixation on operating profits," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 26(C), pages 1-12.
    9. Lin, Hsiou-Wei William & Lo, Huai-Chun & Wu, Ruei-Shian, 2016. "Modeling default prediction with earnings management," Pacific-Basin Finance Journal, Elsevier, vol. 40(PB), pages 306-322.
    10. Saeed Siyal, Waqas Ahmed, Muhammad Musa Kaleem, Lulu Wang, 2020. "Determinants of Real Earning Management: A Study in Public Listed Companies in Pakistan Stock Exchange," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 5(2), pages 96-111, October.
    11. Campa, Domenico, 2019. "Earnings management strategies during financial difficulties: A comparison between listed and unlisted French companies," Research in International Business and Finance, Elsevier, vol. 50(C), pages 457-471.
    12. Özgür, Arslan-Ayaydin & Thewissen, James & Torsin, Wouter, 2021. "Earnings Management Methods and CEO Political Affiliation," LIDAM Discussion Papers LFIN 2021017, Université catholique de Louvain, Louvain Finance (LFIN).
    13. Enomoto, Masahiro & Kimura, Fumihiko & Yamaguchi, Tomoyasu, 2015. "Accrual-based and real earnings management: An international comparison for investor protection," Journal of Contemporary Accounting and Economics, Elsevier, vol. 11(3), pages 183-198.
    14. Carlos J.O. Trejo-Pech & Richard N. Weldon & Michael A. Gunderson, 2016. "Earnings Management through Specific Accruals and Discretionary Expenses: Evidence from U.S. Agribusiness Firms," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 64(1), pages 89-118, March.
    15. Campa, Domenico & Camacho-Miñano, María-del-Mar, 2015. "The impact of SME’s pre-bankruptcy financial distress on earnings management tools," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 222-234.
    16. Lee, Eugenia Y. & Ha, Wonsuk & Park, Sunyoung, 2023. "Auditor specialization in R&D and clients’ R&D investment-q sensitivity," Journal of Contemporary Accounting and Economics, Elsevier, vol. 19(2).
    17. repec:bof:bofrdp:urn:nbn:fi:bof-201508131351 is not listed on IDEAS
    18. Tsung-Kang Chen & Yijie Tseng & Yu-Ting Hsieh, 2015. "Real Earnings Management Uncertainty and Corporate Credit Risk," European Accounting Review, Taylor & Francis Journals, vol. 24(3), pages 413-440, September.
    19. Camacho-Miñano, María-del-Mar & Campa, Domenico, 2014. "Integrity of financial information as a determinant of the outcome of a bankruptcy procedure," International Review of Law and Economics, Elsevier, vol. 37(C), pages 76-85.
    20. Jiang, Haiyan & Hu, Yuanyuan & Zhang, Honghui & Zhou, Donghua, 2018. "Benefits of Downward Earnings Management and Political Connection: Evidence from Government Subsidy and Market Pricing," The International Journal of Accounting, Elsevier, vol. 53(4), pages 255-273.
    21. Ahmad Almashaqbeh & Hasnah Shaari & Hijattulah Abdul-Jabbar, 2019. "The Effect of Board Diversity on Real Earnings Management: Empirical Evidence From Jordan," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 495-508, August.

    More about this item

    Keywords

    Earnings management; cash flow activities; stock returns.;
    All these keywords.

    JEL classification:

    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ers:ijebaa:v:viii:y:2020:i:4:p:1011-1022. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marios Agiomavritis (email available below). General contact details of provider: https://ijeba.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.