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Association between Earnings Management and Earnings Quality: Comparative Study between Insider and Outsider Economics Clusters

In: Advanced Issues in the Economics of Emerging Markets

Author

Listed:
  • Anna Purwaningsih
  • Indra Wijaya Kusuma

Abstract

This study examines associations between accrual earnings management (AEM) and real earnings management (REM), and earnings quality between countries considered under insider economics and outsider economics clusters. Countries included in the outsider economics cluster are Singapore, Malaysia, and Hong Kong. Meanwhile, countries included in the insider economics cluster are Indonesia, the Philippines, and South Korea. Earnings management practices have changed from AEM to REM since the publication of the Sarbanes Oxley Act and DFA 954 implementation of the Claws back provision policy in the United States. Research data were obtained from the Bloomberg database, 2010–2016. Regression analysis and t-test were utilized. This study compared AEM and REM to determine which is stronger based on country clusters, as well as the association between AEM or REM and earnings quality. The results of this study indicate that AEM and REM are associated with the quality of earnings in the insider economics cluster. However, AEM and REM are not associated with earnings quality in the outsider economics cluster. Furthermore, associations between AEM and earnings quality are stronger than associations between REM and earnings quality in insider economics cluster.

Suggested Citation

  • Anna Purwaningsih & Indra Wijaya Kusuma, 2020. "Association between Earnings Management and Earnings Quality: Comparative Study between Insider and Outsider Economics Clusters," International Symposia in Economic Theory and Econometrics, in: Advanced Issues in the Economics of Emerging Markets, volume 27, pages 103-113, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:isetez:s1571-038620200000027008
    DOI: 10.1108/S1571-038620200000027008
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    More about this item

    Keywords

    Accrual earnings management; real earnings management; earnings quality; outsider economics cluster; insider economics cluster; comparative study; cross-country study; M41 Accounting;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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