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The Value Relevance Of Earning Management In Manufacturing Industries Before And During The Financial Crisis

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  • Stefano AZZALI

    () (Universita degli Studi di Parma, Italy)

  • Luca FORNACIARI

    () (Universita degli Studi di Parma, Italy)

  • Tatiana MAZZA

    () (Universita degli Studi di Parma, Italy)

Abstract

This paper empirically investigates the value relevance of reported earnings during the period 2006-2011 for 193 firms (excluding banks and insurance companies) listed in the Milan Stock Exchange, representing about 91.28% of the stock exchange capitalization (30 April 2012). The objective of the paper is to analyze: a) the value relevance of earnings, cash flow from operations, discretionary and non-discretionary accruals; b) the effect of Global Financial Crisis on the value relevance of accounting information. The paper contributes to examine different components of earnings and to filling a gap extending the analysis to the financial crisis. To test our hypotheses first, we determined the accruals by applying specific models proposed in the international literature, such as the Jones (1991) model and its subsequent amendments; second, we analysed the value relevance of earnings, cash flow and accruals basing the analysis on Ohlson (1995) model, extensively used in previous value relevance researches. The findings show that cash flow from operations, discretionary and non-discretionary accruals have different value relevance. In addition, the results describe the reduction of value relevance during the economic and financial crisis.

Suggested Citation

  • Stefano AZZALI & Luca FORNACIARI & Tatiana MAZZA, 2013. "The Value Relevance Of Earning Management In Manufacturing Industries Before And During The Financial Crisis," European Journal of Accounting, Finance & Business, "Stefan cel Mare" University of Suceava, Romania - Faculty of Economics and Public Administration, West University of Timisoara, Romania - Faculty of Economics and Business Administration, vol. 1(1), pages 3-55, June.
  • Handle: RePEc:scm:ejafbu:v:1:y:2013:i:1:p:3-55
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