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Article
Publication date: 18 October 2021

Deepa Mangala and Neha Singla

This study aims to investigate the role of corporate governance practices in restraining earnings management in Indian commercial banks.

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Abstract

Purpose

This study aims to investigate the role of corporate governance practices in restraining earnings management in Indian commercial banks.

Design/methodology/approach

Estimation of earnings management is based on discretionary loan loss provision and discretionary realised security gains and losses using Beatty et al. (2002) model. The effect of corporate governance on earnings management is examined by performing two-way least square dummy variable regression. Data for a period of five years (2016–2020) is collected from the Centre for Monitoring Indian Economy ProwessIQ database, Reserve Bank of India website, annual report of banks, National Stock Exchange and bank’s website.

Findings

Regression results exhibit that number of board committees, size and independence of audit committee and joint audit are significantly effective in curbing earnings management. Other board-related variables (size, independence, meetings and diligence) and audit committee variables (meetings and diligence) are not effective in restraining earnings management in Indian banks.

Practical implications

The findings may prove to be helpful to regulators, board of directors and investors. It shows the weak area of corporate governance in India that is lack of autonomy to independent directors, which needs regulators attention and it also suggests that the number of independent auditors should be adequate for audit purposes. The board of directors must ensure the formulation of an adequate number of committees, which perform their own super specialised functions. This study brings an alarm to investors not to rely on reported earnings alone as they may be manipulated.

Originality/value

This paper substantiates the scant literature on the role of corporate governance practices in restraining earnings management in banks of emerging markets and to the best of the authors’ knowledge impact of joint audits on earnings management is previously unexplored in Indian banks, which are examined in this study.

Details

Journal of Financial Reporting and Accounting, vol. 21 no. 3
Type: Research Article
ISSN: 1985-2517

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Article
Publication date: 31 December 2021

Deepa Mangala and Mamta Dhanda

The purpose of this study is to examine the influence of earnings management during initial public offerings on the listing day returns.

553

Abstract

Purpose

The purpose of this study is to examine the influence of earnings management during initial public offerings on the listing day returns.

Design/methodology/approach

The study collected data for 511 Indian IPOs that came between April 2003 and March 2019 for calculating earnings management. On the basis of the Cross Sectional Modified Jones Model 1995, the paper presents three proxies of earnings management as discretionary accruals (DA), discretionary current accruals (DCA) and discretionary long-term accruals (DLA). The study further used correlation and multiple regression analysis to assess the impact of earnings management on listing day returns.

Findings

The findings show that earnings management and listing day returns vary through issue-year and industry-type. Apart from it, the study reveals a greater contribution of short-term accruals in earnings management on the basis of higher DCA values. It also discloses that the aggregate level of earnings management (DA) influences listing returns, whereas DCA and DLA separately have no impact on the listing day returns of the Indian IPOs.

Research limitations/implications

The findings are useful to potential investors and analysts to observe, assess and understand the quality of financial reports that are based on fallacious disclosure of accounting figures. The study also reflects the efficacy of Indian regulatory norms for IPOs in constraining earnings management and underpricing, thus providing meaningful insight to the policy makers and the regulators.

Originality/value

This study is distinguished by its focus on determining the influence of earnings management on listing day returns in Indian IPOs by using three earnings management proxies.

Details

Journal of Accounting in Emerging Economies, vol. 12 no. 5
Type: Research Article
ISSN: 2042-1168

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Article
Publication date: 17 December 2021

Deepa Mangala and Mamta Dhanda

This study aims to examine earnings management around initial public offerings (IPOs) in India. It also explores the influence of issue characteristics on earnings management…

349

Abstract

Purpose

This study aims to examine earnings management around initial public offerings (IPOs) in India. It also explores the influence of issue characteristics on earnings management around the IPOs.

Design/methodology/approach

A sample of 511 IPOs that came during April 2003-March 2019 is studied for calculating earnings management for pre-issue, issue and post-issue years. Using Cross-Sectional Modified Jones Model, the paper presents earnings management on the basis of three proxies i.e. discretionary accruals, discretionary current accruals and discretionary long-term accruals. The influence of issue characteristics on earnings management practised around the IPOs is also observed through correlation and multiple regression analysis.

Findings

The paper finds that earnings management is abnormally high during the issue year compared with pre-issue and post-issue years. It also unveils that profitability, premium, age, and size of the issuer significantly determine the level of pre-issue and issue year earnings management practised by Indian IPO issuers.

Research limitations/implications

The findings are useful to stakeholders (potential investors, analysts and regulators) to observe, assess and understand the quality of financial numbers that are based on fallacious disclosure of accounting figures. It provides insight into the possibilities of managed earnings around the issue that could influence investors’ decision-making. Further, the study reflects the efficacy of Indian regulatory norms for IPOs.

Originality/value

To the authors’ knowledge, it is the only Indian study that had used an extensive data set of about two decades to calculate earnings management during pre-issue, issue and post-issue years. The uniqueness of the study further lies in three proxies of earnings management representing short-term and long-term accruals. Moreover, it is the first study to observe the influence of IPO issue characteristics on earnings management.

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Article
Publication date: 24 January 2022

Deepa Mangala and Lalita Soni

Banking industry peculiarly has become soft target for several pernicious deceptive and fraudulent activities. The purpose of this paper is to systematically review the literature…

3198

Abstract

Purpose

Banking industry peculiarly has become soft target for several pernicious deceptive and fraudulent activities. The purpose of this paper is to systematically review the literature published in past 20 years on bank frauds and present a holistic view on causes and consequences of bank frauds and measures to curtail this menace. Towards the end the paper provides avenues for future research.

Design/methodology/approach

A systematic literature review approach is used in this study and articles are selected via pre-set inclusion criteria. The literature is mapped on the basis of databases, year of publication, country of study and journal of publication. This paper is based on 70 selected articles published in four prominent databases between 2000 and 2021.

Findings

This study reveals that frauds in banking industry have become a matter of grave concern for almost all countries across the globe, causing significant financial and non-financial damages to banks, customers, other stakeholders and economy. Numerous factors such as pressure and opportunity are responsible for fraud occurrence. This study further evinced that banking institutions inevitably should have a robust fraud risk management in place to prevent, detect and respond to defalcation.

Originality/value

To the best of the authors’ knowledge, this is the only paper among 70 selected articles which systematically reviews the literature published in past 20 years and provides a comprehensive view on all aspects related to bank frauds.

Details

Journal of Financial Crime, vol. 30 no. 1
Type: Research Article
ISSN: 1359-0790

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