Corporate Cash Holdings and Earnings Management: An analysis of fixed effect model
DOI:
https://doi.org/10.54691/bcpbm.v26i.2044Keywords:
Earnings management; cash holding; property rights; external supervision.Abstract
Cash holding is closely related to corporate earnings management. The difference of earnings management plays an important role in the development of companies. The data in this paper comes from the China Stock Market Accounting Research (CSMAR) and uses Python and Stata to study the relationship between cash holding and earning management. The fundamental regression results obtained through the fixed effects model show that high cash holdings of enterprises can increase the level of earnings management, which is still valid after a series of robustness tests. Further, we find that cash holdings promote earnings management more strongly in companies whose auditors are not from the Big Four accounting firms and in state-owned enterprises.
Downloads
References
Davidson, P., 1965. Keynes's finance motive. Oxford. Econ. Pap. 17 (1), 47–65. DOI: https://doi.org/10.1093/oxfordjournals.oep.a040978
Keynes, J.M., 1936. The General Theory of Employment, Interest and Money. McMillan, London.
Opler, T., Pinkowitz, L., Stulz, R., Wiliamson, R. The Determinants and Implications of Corporate Cash Holdings [J]. Journal of Financial Economics, 1999, 52(1): 3—46.
Harford, Jarrad (1999), “Corporate Cash Reserves and Acquisitions,” Journal of Finance 54(6), 1969-1997. DOI: https://doi.org/10.1111/0022-1082.00179
Jensen, M., Meckling, W. Theory of the Firm: Managerial Behavior，Agency Costs and Ownership Structure [J]. Journal of Financial Economics, 1976, 3(4):305—360. DOI: https://doi.org/10.1016/0304-405X(76)90026-X
Bertrand M, Schoarl. Managing with style: the effert of managers on firm policies [J]. Quarterly Journal of Economics, 2003(4): 1169-1208. DOI: https://doi.org/10.1162/003355303322552775
Shleifer A, Vishny R. A Survey of Corporate Governance [J]. Journal of Finance,1997,52(2). DOI: https://doi.org/10.1111/j.1540-6261.1997.tb04820.x
Dai D, Mao X, Deng F. A research on impairment of assets in listed firms with negative earnings in China[J]. Front. Bus. Res. China，2007 (1). DOI: https://doi.org/10.1007/s11782-007-0020-1
Degeorge F, Ding Y, Jeanjean T. Analyst coverage, earnings management and financial development; An international study [J]. Journal of Accounting & Public Policy, 2013, 32(1); 1-25. DOI: https://doi.org/10.1016/j.jaccpubpol.2012.10.003
Hu Juncheng. Do facilitation payments affect earnings management? Evidence from China[J]. Journal of Corporate Finance, 2021, 68. DOI: https://doi.org/10.1016/j.jcorpfin.2021.101936
Cudia Cynthia P. et al. Effect of Firm Characteristics and Corporate Governance Practices on Earnings Management: Evidence from Publicly Listed Property Sector Firms in the Philippines[J]. Vision: The Journal of Business Perspective, 2021, 25(1): 77-87. DOI: https://doi.org/10.1177/0972262920953428
Xu, N.H., Li, X.R., Yuan, Q.B., Chan, K.C., 2014. Excess perks and stock price crash risk: evidence from China. J. Corp. Finance 25, 419–434. DOI: https://doi.org/10.1016/j.jcorpfin.2014.01.006
Opler, T., Pinkowitz, L., Stulz, R., Williamson, R., 1999. The determinants and implications of corporate cash holdings. J. Financ. Econ. 52 (1), 3–46. DOI: https://doi.org/10.1016/S0304-405X(99)00003-3
Dittmar, A., Mahrt-Smith, J., Servaes, H., 2003. International corporate governance and corporate cash holdings. J. Financ. Quant. Anal. 38 (1), 111–133. DOI: https://doi.org/10.2307/4126766
Xu, N., Chen, Q., Xu, Y., Chan, K.C., 2016. Political uncertainty and cash holdings: evidence from China. J. Corp. Finan. 40, 276–295. DOI: https://doi.org/10.1016/j.jcorpfin.2016.08.007
Ghosh D, Olsen L. Environmental uncertainty and managers’ use of discretionary accruals[J]. Accounting, Organizations and Society, 2009, 34(2): 188-205. DOI: https://doi.org/10.1016/j.aos.2008.07.001
Dechow M, Sloan G, Sweeney P. Detecting Earnings Management[J]. The Accounting Review, 1995, 70(3): 193-225.
Jin, L., Myers, S.C., 2006. R-2 around the world: new theory and new tests. J Financ. Econ. 79, 257–292. DOI: https://doi.org/10.1016/j.jfineco.2004.11.003
Hutton, A.P., Marcus, A.J., Tehranian, H., 2009. Opaque financial reports, R-2, and crash risk. J Financ Econ. 94, 67–86. DOI: https://doi.org/10.1016/j.jfineco.2008.10.003
Kim, J.B., Li, Y.H., Zhang, L.D., 2011a. Corporate tax avoidance and stock price crash risk: firm-level analysis. J. Financ. Econ. 100, 639–662. DOI: https://doi.org/10.1016/j.jfineco.2010.07.007
Kim, J.B., Li, Y.H., Zhang, L.D., 2011b. CFOs versus CEOs: equity incentives and crashes. J. Financ. Econ. 101, 713–730. DOI: https://doi.org/10.1016/j.jfineco.2011.03.013
Harjoto, M., Laksmana, I., Lee, R., 2015. Board diversity and corporate social responsibility. J. Bus. Ethics 132 (4), 641–660. DOI: https://doi.org/10.1007/s10551-014-2343-0
Yasser, Q.R., Al Mamun, A., Ahmed, I., 2017. Corporate social responsibility and gender diversity: insights from Asia-Pacific. Corp. Soc. Responsib. Environ. Manage. 24 (3), 210–221. DOI: https://doi.org/10.1002/csr.1400
Garcia-Sanchez, I.M., Hussain, N., Martinez-Ferrero, J., 2019. An empirical analysis of the complementarities and substitutions between effects of CEO ability and corporate governance on socially responsible performance. J. Clean. Prod. 215 (April 1), 1288–1300. DOI: https://doi.org/10.1016/j.jclepro.2019.01.130
Jeremy Bertomeu et al. How Pervasive Is Earnings Management? Evidence from a Structural Model[J]. Management Science, 2020. DOI: https://doi.org/10.1287/mnsc.2020.3717
Lei Yu et al. Empirical research on the correlation between Real Earnings Management of state-owned enterprises and executive compensation from the perspective of executive structural power[J]. International Journal of Financial Engineering, 2019, 6(1): 19. DOI: https://doi.org/10.1142/S2424786319500087
Downloads
Published
Issue
Section
