EFFECT OF CORPORATE REPUTATION BASED ON ACCOUNTING TRANSPARENCY ON EARNINGS MANAGEMENT OF PUBLIC COMPANIES ON B3
DOI:
https://doi.org/10.17524/repec.v13i2.2229Keywords:
Earnings management, Discretionary accruals, Corporate reputation, Signaling theoryAbstract
Objective: This study aims to investigate the relationship between corporate reputation and earnings management in public companies listed in Brasil, Bolsa, Balcão (B3).
Method: The sample is composed of 231 firms (1,355 observations) of all non-financial companies listed in B3, during a period between 2010 and 2017. Earnings management is measured by Jones (1991) modified by Dechow et al. (1995), Larcker and Richardson (2004) and Kothari, Leone and Wasley (2005). Corporate reputation (REP) is a binary variable based on the Transparency Trophy.
Results: Corporate reputation through accounting transparency has a negative relationship with accruals discretionary, so corporate reputation increases the accounting quality, in which the H1 is not rejected.
Contributions: Therefore, a good reputation is a signal to shareholders, creditors and other stakeholders regarding the quality of accounting information, which consequently gives firms a competitive advantage, thus, demonstrating that reputable firms are a good investment.
References
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Gioielli, S. O., Carvalho, A. G., & Sampaio, J. O. (2013). Capital de risco e gerenciamento de resultados em IPOs. Brazilian Business Review, 10(4), 32-68.
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Jones, J. J. (1991). Earnings management during import relief investigations. Journal of Accounting Research, 29(2), 193-228.
Kim, Y., Park, M. S., & Wier, B. (2012). Is earnings quality associated with corporate social responsibility? The Accounting Review, 87(3), 761-796. 10.2308/accr-10209.
Kothari, S. P., Leone, A. J., & Wasley, C. E. (2005). Performance matched discretionary accrual measures. Journal of Accounting and Economics, 39(1), 163-197. 10.1016/j.jacceco.2004.11.002.
Larcker, D. F., & Richardson, S. A. (2004). Fees paid to audit firms, accrual choices, and corporate governance. Journal of Accounting Research, 42(3), 625-658. 10.1111/j.1475-679X.2004.t01-1-00143.x.
Li, H. (2010). Reputation, accounting information and debt contracts in Chinese family firms. China Journal of Accounting Research, 3(1), 95-129. 10.1016/S1755-3091(13)60021-0.
Luchs, C., Stuebs, M., & Sun, L. (2009). Corporate reputation and earnings quality. The Journal of Applied Business Research, 25(4), 47-54. 10.19030/jabr.v25i4.1016.
Magro, C. B. D., Silva, T. B. J., & Klann, R. C. (2017). Comportamento estratégico organizacional e a prática de gerenciamento de resultados nas empresas brasileiras. Revista Ibero-Americana de Estratégia, 16(1), 119-137.
Melo, T. & Garrido-Morgado, A. (2012). Corporate reputation: A combination of social responsibility and industry. Corporate Social Responsibility and Environmental Management, 19(1), 11-31. 10.1002/csr.260.
Roberts, P. W. & Dowling, G. R. (2002). Corporate reputation and sustained superior financial performance. Strategic Management Journal, 23(12), 1077-1093. 10.1002/smj.274.
Scholtens, B., & Kang, F. C. (2013). Corporate social responsibility and earnings management: Evidence from Asian economies. Corporate Social Responsibility and Environmental Management, 20(2), 95-112. 10.1002/csr.1286.
Scott, W. R. (2012). Financial accounting theory. 6th ed. Toronto: Prentice Hall.
Sincerre, B. P., Sampaio, J., & Famá, R. (2016). Emissão de dívida e gerenciamento de resultados. Revista Contabilidade & Finanças - USP, 27(72), 291-305.
Skinner, D. J., & Sloan, R. G. (2002). Earnings surprises, growth expectations, and stock returns or don't let an earnings torpedo sink your portfolio. Review of Accounting Studies, 7(2-3), 289-312. 10.1023/A:1020294523516.
Spence, M. (1973). Job market signaling. The Quartely Journal of Economics, 87(3), 355-374. 10.1016/B978-0-12-214850-7.50025-5.
Van Riel, C. B. M. & Fombrun, C. J.(2007). Essentials of corporate communications. New York: Routledge.
Walker, K. (2010). A systematic review of the corporate reputation literature: definition, measurement, and theory. Corporate Reputation Review, 12(4), 357-387. 10.1057/crr.2009.26.
Wu, P., Gao, L., & Li, X. (2016). Does the reputation mechanism of media coverage affect earnings management? Evidence from China. Chinese Management Studies, 10(4), 627-656. 10.1108/CMS-08-2016-0177.
Xie, B., Davidson, W. N., & DaDalt, P. J. (2003). Earnings management and corporate governance: the role of the board and the audit committee. Journal of Corporate Finance, 9(3), 295-316. 10.1016/S0929-1199(02)00006-8.
Yoon, E., Guffey, H. J., & Kijewski, V. (1993). The effects of information and firm reputation on intentions to buy a business service. Journal of Business Research, 27, 215-228. 10.1016/0148-2963(93)90027-M.
Almeida, F. L., & Lamounier, W. M. (2014). Prestação de serviços de consultoria por auditores independentes e gerenciamento de resultados em empresas brasileiras. Contexto - Revista do Programa de Pós-Graduação em Controladoria e Contabilidade da UFRGS, 14(28), 4-20.
Associação Nacional dos Executivos de Finanças, Administração e Contabilidade. (2018). Ganhadoras anteriores. Recuperado de https://www.anefac.org/copia-transparencia-regulamento.
Ball, R. (2009). Market and political/regulatory perspectives on the recent accounting scandals. Journal of Accounting Research, 47(2), 277-323. 10.1111/j.1475-679X.2009.00325.x.
Bergh, D. D., Ketchen, D. J. Jr., Boyd, B. K. & Bergh, J. (2010). New frontiers of the reputation - performance relationship: Insights from multiple theories. Journal of Management, 36(3), 620-632. 10.1177/0149206309355320.
Bozzolan, S., Fabrizi, M., Mallin, C. A., & Michelon, G. (2015). Corporate social responsibility and earnings quality: International evidence. The International Journal of Accounting, 50(4), 361-396. 10.1016/j.intacc.2015.10.003.
Cao, Y., Myers, L. A., & Omer, T. C. (2012). Does firm reputation matter for financial reporting quality? Evidence from restatements. Contemporary Accounting Research, 29(3), 956-990. 10.1111/j.1911-3846.2011.01137.x.
Chaney, P. K., Faccio, M., & Parsley, D. (2011). The quality of accounting information in politically connected firms. Journal of Accounting and Economics, 51(1-2), 58-76. 10.1016/j.jacceco.2010.07.003.
Chih, H. L., Shen, C. H., & Kang, F. C. (2008). Corporate social responsibility, investor protection, and earnings management: Some international evidence. Journal of Business Ethics, 79(1-2), 179-198. 10.1007/s10551-007-9383-7.
Choi, T. H., & Pae, J. (2011). Business ethics and financial reporting quality: Evidence from Korea. Journal of Business Ethics, 103(3), 403-427. 10.1007/s10551-011-0871-4.
Davies, G., Chun, R., Silva, R. V. & Roper, S. (2003). Corporate reputational and competitiveness. London: Routledge.
Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting earnings management. The Accounting Review, 70(2),193–225.
Dechow, P. M., Ge, W., & Schrand, C. M. (2010). Understanding earnings quality: A review of the proxies, their determinants and their consequences. Journal of Accounting and Economics, 50(2-3), 344-401. 10.1016/j.jacceco.2010.09.001.
Dyck, A., Volchkova, N., & Zingales, L. (2008). The corporate governance role of the media: Evidence from Russia. Journal of Finance, 63(3), 1093-1135. 10.1111/j.1540-6261.2008.01353.x.
Fombrun, C. J. (1996). Reputation: realizing value from the corporate image. Boston: Harvard Business School Press.
Fombrun, C. J. & Shanley, M. (1990). What's in a name? Reputation building and corporate strategy. Academy of Management Journal, Mississippi, v. 33, n. 2, p. 233-58. 10.5465/256324.
Garrett, J., Hoitash, R., & Prawitt, D. F. (2014). Trust and financial reporting quality. Journal of Accounting Research, 52(5), 1087-1125. 10.1111/1475-679X.12063.
Gioielli, S. O., Carvalho, A. G., & Sampaio, J. O. (2013). Capital de risco e gerenciamento de resultados em IPOs. Brazilian Business Review, 10(4), 32-68.
Healy, P. M., & Wahlen, J. M. (1999). A review of the earnings management literature and its implications for standard setting. Accounting Horizons, 13(4), 365-383. 10.2308/acch.1999.13.4.365.
Jones, J. J. (1991). Earnings management during import relief investigations. Journal of Accounting Research, 29(2), 193-228.
Kim, Y., Park, M. S., & Wier, B. (2012). Is earnings quality associated with corporate social responsibility? The Accounting Review, 87(3), 761-796. 10.2308/accr-10209.
Kothari, S. P., Leone, A. J., & Wasley, C. E. (2005). Performance matched discretionary accrual measures. Journal of Accounting and Economics, 39(1), 163-197. 10.1016/j.jacceco.2004.11.002.
Larcker, D. F., & Richardson, S. A. (2004). Fees paid to audit firms, accrual choices, and corporate governance. Journal of Accounting Research, 42(3), 625-658. 10.1111/j.1475-679X.2004.t01-1-00143.x.
Li, H. (2010). Reputation, accounting information and debt contracts in Chinese family firms. China Journal of Accounting Research, 3(1), 95-129. 10.1016/S1755-3091(13)60021-0.
Luchs, C., Stuebs, M., & Sun, L. (2009). Corporate reputation and earnings quality. The Journal of Applied Business Research, 25(4), 47-54. 10.19030/jabr.v25i4.1016.
Magro, C. B. D., Silva, T. B. J., & Klann, R. C. (2017). Comportamento estratégico organizacional e a prática de gerenciamento de resultados nas empresas brasileiras. Revista Ibero-Americana de Estratégia, 16(1), 119-137.
Melo, T. & Garrido-Morgado, A. (2012). Corporate reputation: A combination of social responsibility and industry. Corporate Social Responsibility and Environmental Management, 19(1), 11-31. 10.1002/csr.260.
Roberts, P. W. & Dowling, G. R. (2002). Corporate reputation and sustained superior financial performance. Strategic Management Journal, 23(12), 1077-1093. 10.1002/smj.274.
Scholtens, B., & Kang, F. C. (2013). Corporate social responsibility and earnings management: Evidence from Asian economies. Corporate Social Responsibility and Environmental Management, 20(2), 95-112. 10.1002/csr.1286.
Scott, W. R. (2012). Financial accounting theory. 6th ed. Toronto: Prentice Hall.
Sincerre, B. P., Sampaio, J., & Famá, R. (2016). Emissão de dívida e gerenciamento de resultados. Revista Contabilidade & Finanças - USP, 27(72), 291-305.
Skinner, D. J., & Sloan, R. G. (2002). Earnings surprises, growth expectations, and stock returns or don't let an earnings torpedo sink your portfolio. Review of Accounting Studies, 7(2-3), 289-312. 10.1023/A:1020294523516.
Spence, M. (1973). Job market signaling. The Quartely Journal of Economics, 87(3), 355-374. 10.1016/B978-0-12-214850-7.50025-5.
Van Riel, C. B. M. & Fombrun, C. J.(2007). Essentials of corporate communications. New York: Routledge.
Walker, K. (2010). A systematic review of the corporate reputation literature: definition, measurement, and theory. Corporate Reputation Review, 12(4), 357-387. 10.1057/crr.2009.26.
Wu, P., Gao, L., & Li, X. (2016). Does the reputation mechanism of media coverage affect earnings management? Evidence from China. Chinese Management Studies, 10(4), 627-656. 10.1108/CMS-08-2016-0177.
Xie, B., Davidson, W. N., & DaDalt, P. J. (2003). Earnings management and corporate governance: the role of the board and the audit committee. Journal of Corporate Finance, 9(3), 295-316. 10.1016/S0929-1199(02)00006-8.
Yoon, E., Guffey, H. J., & Kijewski, V. (1993). The effects of information and firm reputation on intentions to buy a business service. Journal of Business Research, 27, 215-228. 10.1016/0148-2963(93)90027-M.
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Published
2019-06-24
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Góis, A. D., & Soares, S. V. (2019). EFFECT OF CORPORATE REPUTATION BASED ON ACCOUNTING TRANSPARENCY ON EARNINGS MANAGEMENT OF PUBLIC COMPANIES ON B3. Journal of Education and Research in Accounting (REPeC), 13(2). https://doi.org/10.17524/repec.v13i2.2229
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