An investigation of the value relevance of deferred tax: the mediating effect of earnings management
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Author(s)Walid Shehata Mohamed Kasim SolimanLink to ORCID Index: https://orcid.org/0000-0002-0361-8864
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Karim Mansour Ali
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DOIhttp://dx.doi.org/10.21511/imfi.17(1).2020.27
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Article InfoVolume 17 2020, Issue #1, pp. 317-328
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- 962 Views
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275 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
There is an academic discussion about the value relevance of deferred tax, which aims to find out the effect of deferred tax on the investors’ decisions. In light of this discussion, the first question is about the impact of deferred tax on management practices to manipulate earnings, which is called earnings management, the second question is about the value relevance of earnings management, the third question is about the value relevance of deferred tax, and the fourth question is about the mediating effect of earnings management. The paper focuses on listed firms in the Egyptian Stock Exchange (EGX), especially firms that were recorded in EGX 100, for six-year period (2013–2018) for 107 firms and 642 completed observations. The findings are as follows: management uses deferred tax to manipulate earnings, since an increase in deferred tax amounts increases earnings management practices; there is no value relevance of earnings management, which means earnings management practices do not affect the investors’ decisions; there is value relevance of deferred tax, which confirms that deferred tax is one of the determinants that affect the investors’ decisions; there is no value relevance of deferred tax through earnings management as a mediator variable since investors are not interested in earnings management practices to make their investment decisions. This paper investigates the relationship between deferred tax, earnings management, and value relevance in the Egyptian context.
- Keywords
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JEL Classification (Paper profile tab)C81, G41, M41
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References40
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Tables7
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Figures3
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- Figure 1. Research model
- Figure 2. Structural model (outer model)
- Figure 3. Structural model (inner model)
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- Table 1. Variable measurement
- Table 2. Descriptive statistics of the variables
- Table 3. Testing of model goodness-of-fit
- Table 4. Outer weights
- Table 5. Values of discriminant validity (cross-loading)
- Table 6. R-square value
- Table 7. Path coefficient
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The relationship between corporate social responsibility and earnings management: accounting for endogeneity
Hyunjung Choi , Byungchul Choi ,
Jungyoon Byun
doi: http://dx.doi.org/10.21511/imfi.15(4).2018.06
Investment Management and Financial Innovations Volume 15, 2018 Issue #4 pp. 69-84 Views: 4622 Downloads: 546 TO CITE АНОТАЦІЯThis study examines the relationship between corporate social responsibility (CSR) and earnings management after controlling for endogeneity of CSR. Using a sample of non-financial firms listed on Korean Securities Market between 2002 and 2010, this study finds that ignoring endogeneity biases the estimated relation between CSR and earnings management. Specifically, the results show that the negative and significant relation between CSR commitment and discretionary accruals reported in the previous studies becomes insignificant. However, the negative and significant relation between CSR commitment and real activities manipulation remains significant even when the endogeneity of CSR commitment is taken into account. Therefore, this study provides evidence that proactive CSR engagement significantly affects firm’s practice of real activities manipulation, while it does not affect its practice of discretionary accruals. These results indicate that CSR commitment leads managers to be more responsible in management of operational activities than in accruals management.
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The impact of key audit matter (KAM) disclosure in audit reports on stakeholders’ reactions: a literature review
Patrick Velte 
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Jakob Issa
doi: http://dx.doi.org/10.21511/ppm.17(3).2019.26
Problems and Perspectives in Management Volume 17, 2019 Issue #3 pp. 323-341 Views: 4543 Downloads: 1863 TO CITE АНОТАЦІЯThis article presents a literature review of 49 empirical studies on key audit matter (KAM) disclosure in audit reports. The study involves a structured literature review on KAM disclosure based on the reactions of stakeholders. The limitations of former studies and useful recommendations for research are stressed. Five major streams of empirical research that analyze the impact of KAM disclosure on stakeholders’ reactions are focused: (1) shareholders (e.g. investors’ perceptions of auditors’ responsibility and litigation, value relevance and investors’ decisions); (2) debtholders (e.g. loan contracting terms); (3) external auditors (e.g. audit processes and audit fees); (4) boards of directors (e.g. earnings management); and (5) other stakeholders (e.g. informational value for suppliers and customers). The authors stress that most of the included studies use experimental or archival data and analyze the impact of KAM disclosure on investor reactions in a US-American setting. As the international standard setters assume a positive impact of KAM on stakeholder reactions, mixed empirical results are found. Although there are some indications of decreased earnings management behavior, most studies find no significant changes in auditor behavior. Furthermore, there are many insignificant results with regard to shareholders’ reaction in line with our stakeholder and behavioral agency framework. The literature review is especially useful for management decisions, because firm reputation may be positively or negatively influenced by KAM regulations.
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The effect of the ownership structure on earnings management practices
Sanaa Maswadeh
doi: http://dx.doi.org/10.21511/imfi.15(4).2018.04
Investment Management and Financial Innovations Volume 15, 2018 Issue #4 pp. 48-60 Views: 2275 Downloads: 290 TO CITE АНОТАЦІЯThe objective of this study is to investigate the effect of the ownership structure, which includes concentration ownership, institutional ownership and foreign ownership in the light of the debt ratio and company size as controlling variables in limiting the earnings management practices of the Jordanian industrial companies for the period 2012–2016. The hypotheses of the study were tested using the multiple regression models. Among the most prominent findings of the study are: the explanatory factor (R2) for the independent and control variables accounts for 38% of the change in the earnings management of the Jordanian industrial companies, moreover, a significant effect of the concentration ownership was found in the limitation of earnings management practices; while, there was no significant influence of institutional ownership and foreign ownership on the earnings management practices in Jordanian industrial companies. Major limitation to this study is the only considered listed industrial Jordanian firms. Thus, the generalization of the results to other sectors and diverse economic conditions and regulations may be constrained. Finally, Jordanian policymaker reform policies motivate companies to increase their interest on concentration ownership structure, as the study showed the significant effect of the concentration ownership in the limitation of earnings management practice.
