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Earnings management: Who do managers consider and what is the relative importance of ethics?

Author

Listed:
  • Paul Coram

    (The University of Adelaide, Adelaide, SA, Australia)

  • James R. Frederickson

    (Melbourne Business School, Melbourne, VIC, Australia)

  • Matthew Pinnuck

    (The University of Melbourne, Melbourne, VIC, Australia)

Abstract

Using responses from Australian CFOs and CEOs to a case-based survey and interviews, we provide insights into managers’ earnings management (EM) decisions. Ethics has the greatest explanatory power for our participants’ EM assessments. Ethical concerns about EM deter EM, but surprisingly, ethical concerns about not managing earnings and missing market expectations motivate EM. The primary economic motivation for EM is shielding current shareholders from the short-term costs of missing market expectations. We find considerable heterogeneity regarding the extent to which CFOs and CEOs believe EM is lying. Finally, CFOs and CEOs believe that each are significantly involved in initiating EM. JEL Classification: M40, M41, M48

Suggested Citation

  • Paul Coram & James R. Frederickson & Matthew Pinnuck, 2024. "Earnings management: Who do managers consider and what is the relative importance of ethics?," Australian Journal of Management, Australian School of Business, vol. 49(2), pages 214-248, May.
    • Handle: RePEc:sae:ausman:v:49:y:2024:i:2:p:214-248
    DOI: 10.1177/03128962221137235
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    More about this item

    Keywords

    Earnings management; ethics; real earnings management;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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