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Fundamental determinants, opportunistic behavior and signaling mechanism: An integration of earnings management perspectives

journal contribution
posted on 05.02.2020, 00:00 authored by Lan SunLan Sun, S Rath
The systematic study of earnings management has now developed into a dynamic body of empirical literature. Despite a dynamic body of earnings management research that are well founded in economic theory, there have not been any attempts to take an integrated perspective (Beneish, 2001).This study integrates and well reconciles different research perspectives in the earnings management literature in attempt to provide a theoretical guidance for the future research. We first formulate a conceptual framework for understanding earnings management fundamental determinants based on market imperfection of information asymmetry and agency conflicts. We then highlight the arguments of opportunistic behaviour and signalling mechanism in order to address that earnings management is not necessarily bad; it could be a device to enhance communication with external parties and improve internal efficiency. Finally, we review different managerial incentives that drive earnings management and we discuss the linkage between efficient contracting, opportunistic behaviour and signalling mechanism.

History

Volume

4

Issue

4

Start Page

406

End Page

420

Number of Pages

15

ISSN

1837-5685

Publisher

World Business Institute

Peer Reviewed

Yes

Open Access

No

External Author Affiliations

Curtin University of Technology

Era Eligible

Yes

Journal

International Review of Business Research Papers