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Article
Publication date: 16 August 2021

Golrida Karyawati Purba, Cornelia Fransisca and Prem Lal Joshi

This study aims to examine the preference for earnings management (EM) strategies according to business strategies, namely, cost leadership strategies and differentiation…

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Abstract

Purpose

This study aims to examine the preference for earnings management (EM) strategies according to business strategies, namely, cost leadership strategies and differentiation strategies,

Design/methodology/approach

This study analyzed 262 samples of manufacturing and service companies listed on the Indonesia Stock Exchange for the period 2019. Logistic regression analysis is used to test the company’s EM strategy preferences based on the applied business strategy.

Findings

The results prove that business strategy has a significant effect on EM strategy preferences. Companies that implement a cost leadership strategy tend to use an accrual form of EM rather than a real form of EM. Conversely, companies that implement a differentiation strategy tend to use a real form of EM.

Research limitations/implications

Theoretically, this study confirms that contingency theory can explain EM practice preferences based on business strategy. Practically, this study helps auditors and financial statement analysts in assessing the quality of financial statements, as well as the risk of financial misstatement based on the business strategy adopted by the companies.

Originality/value

Based on prior literature, research studies on the analysis of EM strategy preferences based on business strategy have been limited.

Details

Journal of Financial Reporting and Accounting, vol. 20 no. 5
Type: Research Article
ISSN: 1985-2517

Keywords

Available. Open Access. Open Access
Article
Publication date: 22 August 2024

Adela Cornelia Fedora, Felizia Arni Rudiawarni, Dedhy Sulistiawan and Abdurrahman Gümrah

The purpose of this study is to investigate the connection between earnings management, business strategy, and market competition.

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Abstract

Purpose

The purpose of this study is to investigate the connection between earnings management, business strategy, and market competition.

Design/methodology/approach

The study utilizes data from non-financial companies listed on the Indonesia and South Korea Stock Exchange between 2017 and 2021, involving 2,598 firms from Indonesia and 3,256 firms from South Korea. We use data panel analysis to explore the relationships between variables.

Findings

Firms using cost leadership are prone to earnings management, while differentiation strategies are less inclined to do so. Market competition negatively correlates with earnings management in Indonesia and South Korea. Market competition moderates the relationship between differentiation strategy and earnings management in both countries. When profitability is considered, the results remain consistent, particularly in Indonesia.

Research limitations/implications

This research enriches previous studies on earnings management and business strategy by examining the extent of industry competitiveness in developed and developing markets.

Practical implications

This finding is significant for managers, guiding them in the selection of an appropriate business strategy within a competitive environment.

Originality/value

This study is unique in that it examines the subject matter in both developed and developing countries, specifically Indonesia and South Korea, to compare the differences.

Details

Asian Journal of Accounting Research, vol. 10 no. 1
Type: Research Article
ISSN: 2459-9700

Keywords

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