Earnings Quality and Corporate Life Cycle Before the Crisis. A Study of Transport Companies Across Europe
Deteriorating macroeconomic conditions and plans to move to a green economy such as the Green Deal are putting pressure on both internal and external stakeholders to create a liquidity cushion in the event of unexpected expenditures. However, when analyzing reported earnings, which may constitute...
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| Format: | Article |
| Language: | English |
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Editura ASE
2022-08-01
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| Series: | Amfiteatru Economic |
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| Online Access: | https://www.amfiteatrueconomic.ro/temp/Article_3142.pdf |
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| author | Lucia Michalkova Martin Cepel Katarina Valaskova Zuzana Vincurova |
| author_facet | Lucia Michalkova Martin Cepel Katarina Valaskova Zuzana Vincurova |
| author_sort | Lucia Michalkova |
| collection | DOAJ |
| description | Deteriorating macroeconomic conditions and plans to move to a green economy such as the
Green Deal are putting pressure on both internal and external stakeholders to create a liquidity
cushion in the event of unexpected expenditures. However, when analyzing reported
earnings, which may constitute a source of internal financing, it is necessary to take into
account the corporate life cycle, which changes the quality of reported earnings. The aim of
the study is to identify and examine the impact of the corporate life cycle on the level of
earnings quality in European transport companies in the pre-crisis years. A hierarchical linear
mixed model was used to reveal these relationships, the sample included more than 30,000
companies covering the years 2011-2019 from 30 European countries. Discretionary accruals
were used as quality proxy earnings, and the company’s life cycle was modeled by the
Dickinson cash flow model. Transport companies in Europe in the pre-crisis period had lowquality reported earnings. These enterprises manipulated earnings in accordance with the
U-shaped curve, where mature firms applied downward earnings management techniques on
average. Very large companies that were listed in the pre-crisis period chose upward earnings
management, while smaller and unlisted companies opportunistically reduced reported
earnings. These results imply that, in the pre-crisis period, European transport companies
opportunistically obtained short-term benefits according to management requirements by
reporting accounting profits other than cash flow. However, during the crisis and post-crisis
years, they reduced their internal financing resources and/or affected the chances of obtaining
state aid and other subsidies approved according to the accounting outputs |
| format | Article |
| id | doaj-art-536d4d497f3d41c08f937aef4a8d86d7 |
| institution | OA Journals |
| issn | 1582-9146 2247-9104 |
| language | English |
| publishDate | 2022-08-01 |
| publisher | Editura ASE |
| record_format | Article |
| series | Amfiteatru Economic |
| spelling | doaj-art-536d4d497f3d41c08f937aef4a8d86d72025-08-20T02:05:32ZengEditura ASEAmfiteatru Economic1582-91462247-91042022-08-01246178279610.24818/EA/2022/61/782 Earnings Quality and Corporate Life Cycle Before the Crisis. A Study of Transport Companies Across EuropeLucia Michalkova0https://orcid.org/0000-0002-3072-7396Martin Cepel1https://orcid.org/0000-0002-6282-9899Katarina Valaskova 2https://orcid.org/0000-0003-4223-7519Zuzana Vincurova3https://orcid.org/0000-0002-6490-2367University of Zilina, Zilina, SlovakiaInstitute of Entrepreneurship and Marketing, University of Entrepreneurship and Law, Prague, Czech RepublicUniversity of Zilina, Zilina, SlovakiaFaculty of Economics and Business, Pan-European University, Bratislava, Slovak RepublicDeteriorating macroeconomic conditions and plans to move to a green economy such as the Green Deal are putting pressure on both internal and external stakeholders to create a liquidity cushion in the event of unexpected expenditures. However, when analyzing reported earnings, which may constitute a source of internal financing, it is necessary to take into account the corporate life cycle, which changes the quality of reported earnings. The aim of the study is to identify and examine the impact of the corporate life cycle on the level of earnings quality in European transport companies in the pre-crisis years. A hierarchical linear mixed model was used to reveal these relationships, the sample included more than 30,000 companies covering the years 2011-2019 from 30 European countries. Discretionary accruals were used as quality proxy earnings, and the company’s life cycle was modeled by the Dickinson cash flow model. Transport companies in Europe in the pre-crisis period had lowquality reported earnings. These enterprises manipulated earnings in accordance with the U-shaped curve, where mature firms applied downward earnings management techniques on average. Very large companies that were listed in the pre-crisis period chose upward earnings management, while smaller and unlisted companies opportunistically reduced reported earnings. These results imply that, in the pre-crisis period, European transport companies opportunistically obtained short-term benefits according to management requirements by reporting accounting profits other than cash flow. However, during the crisis and post-crisis years, they reduced their internal financing resources and/or affected the chances of obtaining state aid and other subsidies approved according to the accounting outputs https://www.amfiteatrueconomic.ro/temp/Article_3142.pdf: earnings qualitytransportationcorporate life cyclecash flow pattern |
| spellingShingle | Lucia Michalkova Martin Cepel Katarina Valaskova Zuzana Vincurova Earnings Quality and Corporate Life Cycle Before the Crisis. A Study of Transport Companies Across Europe Amfiteatru Economic : earnings quality transportation corporate life cycle cash flow pattern |
| title | Earnings Quality and Corporate Life Cycle Before the Crisis. A Study of Transport Companies Across Europe |
| title_full | Earnings Quality and Corporate Life Cycle Before the Crisis. A Study of Transport Companies Across Europe |
| title_fullStr | Earnings Quality and Corporate Life Cycle Before the Crisis. A Study of Transport Companies Across Europe |
| title_full_unstemmed | Earnings Quality and Corporate Life Cycle Before the Crisis. A Study of Transport Companies Across Europe |
| title_short | Earnings Quality and Corporate Life Cycle Before the Crisis. A Study of Transport Companies Across Europe |
| title_sort | earnings quality and corporate life cycle before the crisis a study of transport companies across europe |
| topic | : earnings quality transportation corporate life cycle cash flow pattern |
| url | https://www.amfiteatrueconomic.ro/temp/Article_3142.pdf |
| work_keys_str_mv | AT luciamichalkova earningsqualityandcorporatelifecyclebeforethecrisisastudyoftransportcompaniesacrosseurope AT martincepel earningsqualityandcorporatelifecyclebeforethecrisisastudyoftransportcompaniesacrosseurope AT katarinavalaskova earningsqualityandcorporatelifecyclebeforethecrisisastudyoftransportcompaniesacrosseurope AT zuzanavincurova earningsqualityandcorporatelifecyclebeforethecrisisastudyoftransportcompaniesacrosseurope |