Accrual and Real Earnings Management: One of The Perspectives of Prospect Theory  

Oleh:

Subekti, Imam

Jenis: Article from Journal - ilmiah nasional - terakreditasi DIKTI
Dalam koleksi: Journal of Economics, Business, & Accountancy: ventura vol. 15 no. 3 (Dec. 2012), page 443-456.
Topik: Real Earnings Management; Accruals Earnings Management; Zero and Negative Earnings; and Positive Earnings Threshold
Fulltext: 113-397-1-SM_dv.pdf (184.1KB)

Ketersediaan

Perpustakaan Pusat (Semanggi) Nomor Panggil: VV5.9 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Earning management has become the practice in business. Yet, not all of the companies do this earning management. The study aims to investigate earnings management behavior measured by real and accruals transactions i.e. abnormal cash flow of operation, abnormal production cost, abnormal discretionary, short-term discretionary accruals, and long-term discretionary accruals. The study applies a perspective of prospect theory to predict earnings management behavior of management. In prospect theory, it is predicted that managers tend to manage earnings to avoid negative earnings. Positive earnings around zero is an indication of earnings managed to avoid negative earnings. It shows that most of Indonesian public companies tend to manage earnings based on real transactions than accruals transactions. All proxies of real earnings management support hypotheses that positive earnings around zero are managed through the real transactions. On contrary, only long-term discretionary accruals which support hypothesis revealing that positive earnings around zero is managed through accruals accounts. This result indicates that the Indonesian public companies engage in earnings management in accordance with the predictions of prospect theoty, especially those based on real transactions.

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