IDEAS home Printed from https://ideas.repec.org/a/bcp/journl/v9y2025issue-6p3938-3949.html
   My bibliography  Save this article

Cost Classification Shifting on Earnings Predictability of Listed Firms in Kenya

Author

Listed:
  • Ndungu Beatrice Wanjiru

    (Tutorial Fellow, School of Business Economics and Humanities, Mama Ngina University College)

  • Tobias Olweny

    (School of Business and Economics, Jomo Kenyatta University of Agriculture and Technology, Kenya)

  • Gordon Opuodho

    (School of Business and Economics, Jomo Kenyatta University of Agriculture and Technology, Kenya)

Abstract

Purpose: Cost classification shifting is a key managerial accounting practice that influences the predictability of earnings in listed firms. This study examines how cost classification shifting impacts earnings predictability among firms listed on the Kenya Methodology: This research utilizes panel regression analysis to examine how reclassifying costs affects the predictability of earnings, and the findings indicate a significant inverse relationship between the two. Sales, Selling general and Administrative costs as well as share price and Earnings per share data was collected for a purposive sample of 50 firms in listed in Kenya between 2010 and 2022 Findings: The overall firms analysis revealed a significant negative correlation between cost classification shifting and earnings predictability (r = -0.296, p

Suggested Citation

  • Ndungu Beatrice Wanjiru & Tobias Olweny & Gordon Opuodho, 2025. "Cost Classification Shifting on Earnings Predictability of Listed Firms in Kenya," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(6), pages 3938-3949, June.
    • Handle: RePEc:bcp:journl:v:9:y:2025:issue-6:p:3938-3949
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijriss/Digital-Library/volume-9-issue-6/3938-3949.pdf
    Download Restriction: no
    File URL: https://rsisinternational.org/journals/ijriss/articles/cost-classification-shifting-on-earnings-predictability-of-listed-firms-in-kenya/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Fang Zhao, 2018. "Analyst Coverage and Earnings Management Using Classification Shifting," Accounting and Finance Research, Sciedu Press, vol. 7(3), pages 172-172, August.
    2. Malikov, Kamran & Manson, Stuart & Coakley, Jerry, 2018. "Earnings management using classification shifting of revenues," The British Accounting Review, Elsevier, vol. 50(3), pages 291-305.
    3. Yun Fan & Wayne B. Thomas & Xiaoou Yu, 2019. "The Impact of Financial Covenants in Private Loan Contracts on Classification Shifting," Management Science, INFORMS, vol. 65(8), pages 3637-3653, August.
    4. Hwee C. Tan & Baljit Sidhu, 2012. "Sources of earnings variability and their effect on earnings forecasts," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 52, pages 343-371, October.
    5. Jia Li & Zhoutianyang Sun, 2023. "Cost stickiness, earnings forecast accuracy, and the informativeness of stock prices about future earnings: evidence from China," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-16, December.
    6. Shipeng Han & Zabihollah Rezaee & Ling Tuo, 2019. "Is cost stickiness associated with management earnings forecasts?," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 28(2), pages 173-211, June.
    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. Manish Bansal, 2024. "Unpacking the drivers of earnings management in CSR firms: influence of investor risk perception," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(1), pages 127-142, March.
    2. Manish Bansal, 2024. "Do shifting practices vary across the firm life cycle?," Australian Journal of Management, Australian School of Business, vol. 49(2), pages 142-169, May.
    3. Zalata, Alaa Mansour & Abdelfattah, Tarek, 2021. "Non-executive female directors and earnings management using classification shifting," Journal of Business Research, Elsevier, vol. 134(C), pages 301-315.
    4. Anagnostopoulou, Seraina C. & Gounopoulos, Dimitrios & Malikov, Kamran & Pham, Hang, 2021. "Earnings management by classification shifting and IPO survival," Journal of Corporate Finance, Elsevier, vol. 66(C).
    5. Bansal, Manish & Kumar, Ashish & Bhattacharyya, Asit & Bashir, Hajam Abid, 2023. "Predictors of revenue shifting and expense shifting: Evidence from an emerging economy," Journal of Contemporary Accounting and Economics, Elsevier, vol. 19(1).
    6. Ahmed M. Abdalla & Colin D. B. Clubb, 2024. "Classification shifting using income-decreasing special items: measurement and valuation issues," Review of Accounting Studies, Springer, vol. 29(3), pages 2871-2926, September.
    7. Haeyoung Shin & Michael Lacina & Shanshan Pan, 2024. "The order in a series of continuous special items and the likelihood of income classification shifting," Review of Quantitative Finance and Accounting, Springer, vol. 63(3), pages 829-862, October.
    8. Surendranath Jory & Thanh Ngo & Hongxia Wang, 2021. "Non‐operating earnings and firm risk," Review of Financial Economics, John Wiley & Sons, vol. 39(1), pages 95-123, January.
    9. Amin, Qazi Awais & Cumming, Douglas, 2021. "Blockholders and real earnings management-the emerging markets context," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    10. Al Mabsali, Yousuf Khamis & Hayward, Robert & Eliwa, Yasser, 2021. "Managerial tools used to meet or beat analyst forecasts: Evidence from the UK," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 43(C).
    11. Kalyani Mulchandani & Ketan Mulchandani, 2022. "Does institutional ownership limit classification shifting: evidence from Indian firms," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 19(4), pages 466-477, December.
    12. Sandip Dhole & Ferdinand A. Gul & Sagarika Mishra & Ananda M. Pal, 2021. "The joint information role of analysts’ cash flow and earnings forecasts," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(1), pages 499-541, March.
    13. Li, Mengzhe & Guo, Siyuan & Wang, Xizi & Liu, Yingqi, 2024. "Increase or decrease: Customer digital transformation and supplier cost stickiness," Pacific-Basin Finance Journal, Elsevier, vol. 87(C).
    14. Silhan, Peter A., 2014. "Income smoothing from a Census X-12 perspective," Advances in accounting, Elsevier, vol. 30(1), pages 106-115.
    15. Farnsel, Curtis & Ha, Kelly, 2024. "Do socially responsible firms demonstrate a preference for using classification shifting to manage earnings?," Advances in accounting, Elsevier, vol. 67(C).
    16. Miguel Faria-e-Castro & Radhakrishnan Gopalan & Avantika Pal & Juan M. Sanchez & Vijay Yerramilli, 2022. "EBITDA Add-backs in Debt Contracting: A Step Too Far?," Working Papers 2022-029, Federal Reserve Bank of St. Louis.
    17. Jeffrey Pittman & Yuping Zhao, 2020. "Debt Covenant Restriction, Financial Misreporting, and Auditor Monitoring," Contemporary Accounting Research, John Wiley & Sons, vol. 37(4), pages 2145-2185, December.
    18. Awais Amin, Qazi & Cumming, Douglas, 2023. "Regulatory reforms, board independence and earnings quality," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).
    19. Eric O. Boahen & Emmanuel C. Mamatzakis, 2025. "How culture and legal environment affect classification shifting? Global evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 750-780, January.
    20. Qi Yang & Dejun Wu, 2020. "Does an item change trigger earnings management? Evidence from asset disposal income in China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(5), pages 4593-4619, December.

    More about this item

    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:bcp:journl:v:9:y:2025:issue-6:p:3938-3949. 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: Dr. Pawan Verma (email available below). General contact details of provider: https://rsisinternational.org/journals/ijriss/ .

    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.