Journal of Financial Reporting and Accounting (in press).
ISSN/ISBN: Not available at this time. DOI: Not available at this time.
Abstract: Purpose - This research applies Benford’s Law to examine the earnings management of companies listed in emerging ASEAN-5 countries: Indonesia, Malaysia, Philippines, Thailand, and Vietnam. Design/methodology/approach - We follow Amiram et al. (2015) to measure deviations from Benford’s Law of the first digits of numbers reported in financial statements. We use the Jones-modified performance-match model (Jones, 1991; Dechow et al., 1995; Kothari et al., 2005) to estimate accrual earnings management. We use a sample of 47,389 observations of listed companies in ASEAN-5 countries from 2006 to 2019. We run OLS regressions to test our hypotheses. Findings - We find that the first digits of numbers reported in the financial statements of companies in the sample closely conform to Benford’s Law. Further evidence shows that the deviation from Benford’s Law is positively related to abnormal accruals. The relationship between deviation from Benford’s Law and abnormal accruals is more pronounced for the post-IFRS adoption period. The results survive for some robustness checks. Research limitations/implications - We show that Benford’s Law holds for financial statements of companies listed in the emerging ASEAN-5 countries. Practical implications - Auditors could use Benford’s Law as an analytical procedure to assess the risks of material misstatements. Also, other users could apply Benford’s Law on audited financial statements to foresee undetected misstatements. Originality/value - We provide original evidence that financial statements of ASEAN-5 countries follow Benford’s Law. The evidence supports the usefulness of Benford’s Law in developing markets.
Bibtex:
@article{,
title = "Applying Benford{\textquoteright}s Law to examine earnings management: Evidence from emerging ASEAN-5 countries",
author = "Loan Nguyen and {Tri Tri} Nguyen and Thanh Le and Nghia Mai",
year = "2023",
month = jul,
day = "5",
language = "English",
journal = "Journal of Financial Reporting and Accounting",
publisher = "Emerald",
url = “https://pure.roehampton.ac.uk/portal/en/publications/applying-benfords-law-to-examine-earnings-management-evidence-fro”,
}
Reference Type: Journal Article
Subject Area(s): Accounting