Analysis of Factors Affecting the Motivation of Earnings Management in Manufacturing Listed in Indonesia Stock Exchange

This study aimed to analyse the factors that affect the motivation for the management of earnings management activities in the automotive sector manufacturing companies and component 2011-2013. Some of the factors that affect earnings management motivation used in this study is a bonus motivation, motivation debt contracts, and motivation political costs (the size of the company). Source of data used in this study is empirical data obtained from Indonesian capital market consists of the annual financial statement data and other supporting data. The sample of this study consisted of 12 companies manufacturing automotive sector and components that publish annual financial statements for 2011-2013. Analysis of the data using the modified Jones models and is equipped with a descriptive analysis, the classical assumption test, and test hypotheses. The results of this study show that (1) the partial methods, motivation bonus (ROA) but no significant negative effect on earnings management. Motivation debt (leverage) has a positive effect and no significant effect on earnings management. Meanwhile, the cost of political motivation (the size of the company) has a positive but not significant effect on earnings management. (2) Simultaneously, motivation bonus (ROA), motivation debt (leverage) and the motivation of the political cost (size of the company) has a positive and significant impact of earnings management. Keywords: Earnings Management, Motivation Bonus, Debt Contracts Motivation, Motivation Company Siz

ANALYSIS OF FACTORS AFFECTING EARNINGS MANAGEMENT : EMPIRICAL STUDY IN AUTOMOTIVE AND COMPONENTS COMPANY LISTED IN INDONESIA STOCK EXCHANGE 2010-2014

This study aims to prove empirically the influence of company size, company age, leverage, and motivation bonus on earnings management in automotive and component company listed on the Indonesian Stock Exchange. Number of samples used were as many as 11 companies are selected using purposive sampling techniques, the study period from 2010 to 2014. Methods of statistical analysis used was multiple regression analysis. These results indicate that company size, company age, leverage and motivation bonus have significant effect on the practice of earnings management

Reference-dependent preferences in the public and private sectors: A nonlinear perspective

Although existing studies in the strategic management literature examine the importance of reference points in the context of managerial decisions vis-à-vis organizational performance, there is surprisingly little evidence on how reference earnings affect employees' wellbeing and behavior. The present study closes this gap by investigating adaptation dynamics towards reference earnings in the context of employees’ behavioral responses to social comparisons. We argue that a wedge between actual and aspiration-level earnings causes discontent that spurs employees into action to materialize their aspirations. The robustness of such action depends on the size of the wedge in a nonlinear fashion, a hypothesis supported by our findings. Nevertheless, heterogeneity in behavioral responses is evident across the public and private sectors and across gender and educational attainment. Such heterogeneity could be partially attributed to differences in public service motivation among public and private sector employees, to the different weights that employees place on pecuniary vs. non-pecuniary rewards, and whether reference earnings are likely to trigger behavioral responses through a 'jealousy' or through an 'ambition' channel. These findings have implications for the design of strategic human resource management policies to establish reward structures encouraging employees to adopt risk attitudes that are consistent with an overall business strategic plan

Corporate dividend policy in practice: the views of Nigerian financial managers

Purpose – The purpose of this study is to provide an additional insight into the dividend puzzle by investigating the field practice of dividend policy in an emerging market such as Nigeria. It also aims to contribute to the literature on industry-related dividend effect by examining whether managerial views on dividend policy differ between financial and non-financial firms. Design/methodology/approach – The study employs semi-structured interviews with the financial managers of 21 Nigerian listed firms. The interviewees were divided into two broad groups of financial versus non-financial firms based on the industry classification of the firms. Findings – The findings suggest that, despite differences in institutional environment, the dividend setting process in Nigerian companies is similar in many extents to those in the US and other developed markets. Nigerian companies exhibit dividend conservatism and typically focus on current earnings, stability of earnings and availability of cash when determining their current dividend levels. However, unlike in prior studies, the interviewees suggest that their companies do not have a target payout ratio; instead, they target the dividend per share when determining the disbursement level. Nevertheless, views regarding these issues vary significantly between financial and non-financial firms. Originality/value – This paper adds to the extant literature that has examined the behavioural aspects of dividend policy using interviews, especially in the context of less-developed markets such as Nigeria. The study also updates and extends prior evidence on an industry-related effect on managerial views on dividend policy

Analysis of Economic Motives in the Individual Choice of Educational Paths

The authors consider the economic motivations when individuals choose an educational path. This line of research is relevant from both, the point of view of science — research of economic behavior of an individual, and the point of view of practice — allows to increase efficiency of investments in a human capital. The authors have developed the economic and mathematical model of choice of optimum educational paths by individuals. The model is realized in the software and approved on real data on more than 5,5 thousand students. For the analysis of the importance of rational economic expectations when an educational path has to be chosen, the paths chosen by students is compared and the educational paths optimum from the point of view of economic rationality are calculated. The analysis of the results has showed that mainly, the choice of educational paths happens according to the economic motivations. On the considered selection, 66 % of prospective students have chosen an optimum path from the point of view of economic preferences. The most significant factor providing development of optimum educational paths is an expectation of higher income upon completion of education — 22 % of all educational paths, and a possibility of cost-cutting of educating or state-subsidized education — 12 %. In our opinion, one of the most important practical results of the research of optimum educational path is the need to consider expectations of students and prospective student when developing a state policy of investment in human capital

A framework for the classification of accounts manipulations

Accounts manipulations have been a matter of research, discussion and, even, controversy in several countries such as the United States, Canada, the United Kingdom, Australia and France. The objective of this paper is to elaborate a general framework for classifying accounts manipulations through a thorough review of the literature. This framework is based on the desire to influence the market participants' perception of the risk associated to the firm. The risk is materialized through the earnings per share and the debt/equity ratio. The literature on this topic is already very rich, although we have identified series of areas in need for further research.accounts manipulations; earnings management; income smoothing; big bath accounting; creative accounting

Employee Heterogeneity and Within-Firm Experience-Earnings Profiles: A Nonparametric Analysis

Abstract Motivated by a priori uncertainty with respect to the parametric specification of the earnings function, I model the earnings function as semiparametric partially linear model and follow the estimation approach described in Robinson (1988). Using data from the personnel records of a large major UK based financial sector employer, I let years of within-firm and pre-firm experience form the nonparametrically modelled component of the earnings function. It is shown that the estimated within-firm experience earnings profiles, which are conditional upon a given number years of pre-firm experience accumulated before entry, converge and even overtake as years of pre-firm experience increases. This result can be explained with the recognition of unobservable explanatory variables, such as the match and individual quality of the employees, both of which are a function of years of within- and pre-firm experience and wages

Reference-dependent preferences in the public and private sectors: A nonlinear perspective

Although existing studies in the strategic management literature examine the importance of reference points in the context of managerial decisions vis-à-vis organizational performance, there is surprisingly little evidence on how reference earnings affect employees' wellbeing and behavior. The present study closes this gap by investigating adaptation dynamics towards reference earnings in the context of employees’ behavioral responses to social comparisons. We argue that a wedge between actual and aspiration-level earnings causes discontent that spurs employees into action to materialize their aspirations. The robustness of such action depends on the size of the wedge in a nonlinear fashion, a hypothesis supported by our findings. Nevertheless, heterogeneity in behavioral responses is evident across the public and private sectors and across gender and educational attainment. Such heterogeneity could be partially attributed to differences in public service motivation among public and private sector employees, to the different weights that employees place on pecuniary vs. non-pecuniary rewards, and whether reference earnings are likely to trigger behavioral responses through a 'jealousy' or through an 'ambition' channel. These findings have implications for the design of strategic human resource management policies to establish reward structures encouraging employees to adopt risk attitudes that are consistent with an overall business strategic plan.adaptation; reference earnings; comparison income; reference-dependent preferences; ESTAR models

Effective Employee Incentive Plans: Features and Implementation Processes

[Excerpt] This paper will evaluate the effectiveness of broad-based employee incentives, identifying the features of effective plans. For our purposes, “broad-based” is used to signal that more than 50 percent of employees are eligible for this variable pay plan. In addition, the terms “variable pay plan” and “pay for performance” are used interchangeably as they appeared in the original sources

“Family” ownership, tunneling and earnings management: A review of the literature

In this review article, we bring together a number of aspects of family firms that are ubiquitous in a number of institutional contexts, often as part of larger business groups. We pay particular attention to the mechanisms by which families retain control over firms, and the incentives of the families in control to expropriate other stakeholders by way of tunnelling. We examine the role of earnings management in facilitating tunnelling, and evidence about the incidence of earnings management in family firms. Our review suggests that while the literature on these aspects of family control is rich, the contexts in which the empirical exercises are undertaken are relatively few, and hence there is considerable opportunity to expand it to other contexts, in particular in the form of cross-country comparisons of the relative impact of agency conflicts and institutions on these issues.http://deepblue.lib.umich.edu/bitstream/2027.42/64422/1/wp954.pd