The study aims to investigate how the presence and absence of institutional equivalents (interaction of industry peers and local peers) affect the earnings management practices of…
Abstract
Purpose
The study aims to investigate how the presence and absence of institutional equivalents (interaction of industry peers and local peers) affect the earnings management practices of firms.
Design/methodology/approach
The study uses discretionary accruals to operationalize earnings management. A sample of 18,744 Bombay Stock Exchange (BSE) listed firm years spanning over 12 financial years (March 2010–March 2021) has been considered and analyzed through panel data regression models.
Findings
The author’s results show that the earnings management practices of a firm's institutional equivalents and the firm's own earnings management are positively associated, implying that firms closely follow their institutional equivalents. This association is found to be more pronounced among focal firms when the difference between the earnings management levels of industry peers and local peers is greater. Further, the author find that large firms aggressively imitate their industry peers and local peers, whereas profitability does not influence their imitation behavior.
Practical implications
The author’s findings have implications for understanding peer imitation processes, particularly when firms face increasingly multifaceted institutional environments. It suggests auditors and analysts take into account the earnings management practices of local and industry peers while analyzing the client's financial statements and making forecasts, respectively.
Originality/value
The study is among the pioneering attempts to explore the domain of earnings management from the lens of institutional equivalence and provides compelling evidence that the interaction of industry peers and local peers impacts the earnings management practices of firms.
Details
Keywords
Mathew Abraham and Prabhu Pingali
This paper aims to understand the significant farm and market-level factors that incentivize the adoption and marketing of pulses influencing its supply response to changing…
Abstract
Purpose
This paper aims to understand the significant farm and market-level factors that incentivize the adoption and marketing of pulses influencing its supply response to changing demand.
Design/methodology/approach
The authors first use a modified Nerlovian supply response model using secondary data to identify the major price and non-price factors influencing the supply of pigeon pea, black and green gram in the major pulses growing states in India. Second, using primary qualitative data the authors map the pulses value chain from farm to retail to identify the how proportional and fixed transaction costs (FCTs) influence market participation of pulses growers and limit the transmission of price and quality information.
Findings
The supply response model shows some positive influence of price on area allocation for pigeon pea and black gram and some negative effects of yield and price increase of competing crops on pigeon pea acreage. However, for the most part, the area of Kharif pulses is inelastic to prices in the long run. Irrigation, rainfall and yields in the lag year are shown to have a significant influence on area allocation for pulses. The market study reveals that low yields, low landholding size and geographical disadvantages of high agro-climatic risk and poor connectivity hinder market access of pulses farmers relative to other crops. Market power in favor of buyers and poor price and quality information is a disadvantage to sellers, influencing their ability to participate in markets.
Research limitations/implications
A quantitative study would be required to identify the magnitude of farm and market-level transaction costs.
Originality/value
This study helps to understand the supply response of pulses and gives suggestions to direct policy to rectify this.