Exploring the Influence of Earnings Management on the Value Relevance of Financial Statements: Evidence from the Bucharest Stock Exchange
Although financial statements are extremely important to investors in decision-making processes, their reliability can be affected by earnings management (EM) practices, which involve manipulating financial reports in order to achieve managerial benefits. This study explores the relationship between...
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| Format: | Article |
| Language: | English |
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MDPI AG
2024-07-01
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| Series: | International Journal of Financial Studies |
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| Online Access: | https://www.mdpi.com/2227-7072/12/3/72 |
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| author | Georgiana Burlacu Ioan-Bogdan Robu Ionela Munteanu |
| author_facet | Georgiana Burlacu Ioan-Bogdan Robu Ionela Munteanu |
| author_sort | Georgiana Burlacu |
| collection | DOAJ |
| description | Although financial statements are extremely important to investors in decision-making processes, their reliability can be affected by earnings management (EM) practices, which involve manipulating financial reports in order to achieve managerial benefits. This study explores the relationship between earnings management and firm valuation, based on accounting information’s predictive value, specifically investigating how EM influences the value relevance (VR) of earnings on share price. The research focuses on a sample of audited companies listed on the Bucharest Stock Exchange (BSE) between 2019 and 2021, comprising 62 entities. Using regression analysis, we explored the importance of accounting information for investors following Ohlson’s research and examined the relationship between EM and VR based on Jones’s model. The findings indicate that earnings significantly impact stock prices, highlighting their value relevance in the Romanian stock market. However, the practice of earnings management reduces the value relevance of earnings because it decreases the reliability of the accounting information. The main contribution of this analysis is to provide a fresh perspective on earnings management (EM) within the BVB framework by highlighting its pivotal role in shaping the motivation and behavior of corporate managers. |
| format | Article |
| id | doaj-art-2e3468d9e7e145e3bf9e737c6f0e0f7f |
| institution | OA Journals |
| issn | 2227-7072 |
| language | English |
| publishDate | 2024-07-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | International Journal of Financial Studies |
| spelling | doaj-art-2e3468d9e7e145e3bf9e737c6f0e0f7f2025-08-20T01:55:33ZengMDPI AGInternational Journal of Financial Studies2227-70722024-07-011237210.3390/ijfs12030072Exploring the Influence of Earnings Management on the Value Relevance of Financial Statements: Evidence from the Bucharest Stock ExchangeGeorgiana Burlacu0Ioan-Bogdan Robu1Ionela Munteanu2Faculty of Economics and Business Administration, Alexandru Ioan Cuza University of Iași, 700505 Iași, RomaniaFaculty of Economics and Business Administration, Alexandru Ioan Cuza University of Iași, 700505 Iași, RomaniaFaculty of Economic Sciences, Department Finance and Accounting, Ovidius University of Constanta, 900527 Constanta, RomaniaAlthough financial statements are extremely important to investors in decision-making processes, their reliability can be affected by earnings management (EM) practices, which involve manipulating financial reports in order to achieve managerial benefits. This study explores the relationship between earnings management and firm valuation, based on accounting information’s predictive value, specifically investigating how EM influences the value relevance (VR) of earnings on share price. The research focuses on a sample of audited companies listed on the Bucharest Stock Exchange (BSE) between 2019 and 2021, comprising 62 entities. Using regression analysis, we explored the importance of accounting information for investors following Ohlson’s research and examined the relationship between EM and VR based on Jones’s model. The findings indicate that earnings significantly impact stock prices, highlighting their value relevance in the Romanian stock market. However, the practice of earnings management reduces the value relevance of earnings because it decreases the reliability of the accounting information. The main contribution of this analysis is to provide a fresh perspective on earnings management (EM) within the BVB framework by highlighting its pivotal role in shaping the motivation and behavior of corporate managers.https://www.mdpi.com/2227-7072/12/3/72accounting informationearningsbook value of equitycash flowsearnings managementvalue relevance |
| spellingShingle | Georgiana Burlacu Ioan-Bogdan Robu Ionela Munteanu Exploring the Influence of Earnings Management on the Value Relevance of Financial Statements: Evidence from the Bucharest Stock Exchange International Journal of Financial Studies accounting information earnings book value of equity cash flows earnings management value relevance |
| title | Exploring the Influence of Earnings Management on the Value Relevance of Financial Statements: Evidence from the Bucharest Stock Exchange |
| title_full | Exploring the Influence of Earnings Management on the Value Relevance of Financial Statements: Evidence from the Bucharest Stock Exchange |
| title_fullStr | Exploring the Influence of Earnings Management on the Value Relevance of Financial Statements: Evidence from the Bucharest Stock Exchange |
| title_full_unstemmed | Exploring the Influence of Earnings Management on the Value Relevance of Financial Statements: Evidence from the Bucharest Stock Exchange |
| title_short | Exploring the Influence of Earnings Management on the Value Relevance of Financial Statements: Evidence from the Bucharest Stock Exchange |
| title_sort | exploring the influence of earnings management on the value relevance of financial statements evidence from the bucharest stock exchange |
| topic | accounting information earnings book value of equity cash flows earnings management value relevance |
| url | https://www.mdpi.com/2227-7072/12/3/72 |
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