Are managers of emerging markets more opportunistic? application of Benford's Law

The current research analyzes cosmetic earnings management practices in emerging and developed markets before and after the global financial crisis. Using digital analysis, by applying Benford's Law the study analyzes the earnings adjustments that exceed a key reference point to determine wheth...

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Bibliographic Details
Published in:PloS one 2024-12, Vol.19 (12), p.e0313611
Main Authors: Hassan, Shoaib, Aksar, Muhammad, Ahmad, Maqbool, Kajanova, Jana
Format: Article
Language:English
Subjects:
Accounting policies
Behavior
Computer and Information Sciences
Crises
Developed countries
Earnings
Earnings management
Economic aspects
Economic crisis
Economic development
Emerging markets
Evaluation
Financial management
Financial statements
Fraud
Industrialized nations
International finance
Law
Laws, regulations and rules
Legislation
Literature reviews
Managers
Pakistan
People and places
Physical Sciences
Profits
Regulatory agencies
Research and Analysis Methods
Research methodology
Social Sciences
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Summary:The current research analyzes cosmetic earnings management practices in emerging and developed markets before and after the global financial crisis. Using digital analysis, by applying Benford's Law the study analyzes the earnings adjustments that exceed a key reference point to determine whether earnings management anomaly exists or not? Based on a sample of 87165 firm-year observations of UK, US, Brazil, Russia, India, China and Pakistan listed corporations. Findings show that the managers of emerging markets have more incentive to manipulate earnings than their counterparts from developed markets. Further, the implementation of strict governance and legislative measures after the global financial crisis have significantly reduced the opportunistic behaviour of managers to manipulate earnings. However, the impact is lesser in emerging markets as compared to UK and US. The empirical findings of this research are useful for policy making and regulatory authorities, investors and other stakeholders as our findings shed light on the restriction of cosmetic earnings management practices. First study that tried to capture the cosmetic earnings management practices in both emerging and developed countries and in both pre and post financial crisis scenario.
ISSN:1932-6203
1932-6203
DOI:10.1371/journal.pone.0313611