Can Managers Use Accruals Quality for Creating Investment Opportunity Set and Increasing Firm Value?
DOI:
https://doi.org/10.21512/bbr.v9i3.4891Keywords:
accruals quality, investment opportunity set, firm valueaccruals quality, firm valueAbstract
There were two main objectives of this research. Firstly, the researchers analyzed the impact of accruals quality and debt on firm value. Secondly, the researchers studied whether managers of a highly leveraged firm could use discretionary accruals for Investment Opportunity Set (IOS). The sample consisted of Indonesian manufacturing firms listed from 2013 to 2016. The researchers utilized Generalized Method of Moments (GMM) method and purposive sampling. The researchers find that accruals quality positively affects firm value. The results also suggest
that there are differences in accruals quality between highly leveraged and unleveraged firms. Furthermore, the results indicate that the more intensive the exploitation of accruals quality is, the greater the positive impact of such activity on firm value will be. Additionally, high-accrual leveraged firms borrow more debt than low-accrual unleveraged firms. Then, unleveraged firms have better accruals quality and cash flow, and highly leveraged firms have more significant accounts receivable and slightly better value of IOS. The findings suggest that managers of highly leveraged firms can use discretionary accruals to increase the value of IOS.
Plum Analytics
References
Asmawanti, D., & Wijayanti, I. O. (2017). Intellectual capital and corporate social responsibility in banking industries in Indonesia. Journal of Economics, Business & Accountancy Ventura, 20(2), 193-202. https://doi.org/10.14414/jebav.v20i2.787
Bei, Z., & Wijewardana, W. P. (2012). Financial leverage, firm growth and financial strength in the listed companies in Sri Lanka. Procedia-Social and Behavioral Sciences, 40, 709-715. https://doi.org/10.1016/j.sbspro.2012.03.253
Chen, K. Y., Elder, R. J., & Hung, S. (2010). The investment opportunity set and earnings management: Evidence from the role of controlling shareholders. Corporate Governance: An International Review, 18(3), 193-211. https://doi.org/10.1111/j.1467-8683.2010.00793.x
Dechow, P. M., & Dichev, I. D. (2002). The quality of accruals and earnings: The role of accrual estimation errors. The Accounting Review, 77(s-1), 35-59.
Doyle, J., Ge, W., & McVay, S. (2007). Determinants of weaknesses in internal control over financial reporting. Journal of Accounting and Economics, 44(1-2), 193-223. https://doi.org/10.1016/j.jacceco.2006.10.003
Francis, J., LaFond, R., Olsson, P., & Schipper, K. (2005). The market pricing of accruals quality. Journal of Accounting and Economics, 39(2), 295-327. https://doi.org/10.1016/j.jacceco.2004.06.003
Gao, J., Cong, L. M., & Evans, J. (2015). Earnings management, IPO underpricing, and post-issue stock performance of Chinese SMEs. The Chinese Economy, 48(5), 351-371. https://doi.org/10.1080/10971475.2015.1067085
Ghozali, I., & Ratmono, D. (2017). Analisis multivariat dan ekonometrika: Teori, konsep, dan aplikasi dengan Eviews 10. Semarang: Badan Penerbit Universitas Diponegoro.
Gill, A., Biger, N., Mand, H. S., & Mathur, N. (2013). Earnings management, firm performance, and the value of Indian manufacturing firms. International Research Journal of Finance and Economics, 116(November), 13-26.
Hidayah, N. (2014). The effect of company characteristics toward firm value in the property and real estate company in Indonesia Stock Exchange. International Journal of Business, Economics and Law, 5(1), 1-8.
Jasman, J. (2015). Manajemen laba: Bukti empiris pada perusahaan perbankan yang terdaftar di Bursa Efek Indonesia. Jurnal Riset Akuntansi dan Keuangan, 11(1), 1-14.
Javadi, S. M., Alimoradi, A., & Ashtiani, M. (2017). Relationship between financial leverage and firm growth in the oil and gas industry: Evidence from OPEC. Petroleum Business Review, 1(1), 9-21.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.
Kallapur, S., & Trombley, M. A. (2001). The investment opportunity set: Determinants, consequences and measurement. Managerial Finance, 27(3), 3-15. https://doi.org/10.1108/03074350110767060
Kothari, S. P., Leone, A. J., & Wasley, C. E. (2005). Performance matched discretionary accrual measures. Journal of Accounting and Economics, 39(1), 163-197. https://doi.org/10.1016/j.jacceco.2004.11.002
Lambert, R. A. (2001). Contracting theory and accounting. Journal of Accounting and Economics, 32(1-3), 3-87. http://dx.doi.org/10.1016/S0165-4101(01)00037-4
Linck, J. S., Netter, J., & Shu, T. (2013). Can managers use discretionary accruals to ease financial constraints? Evidence from discretionary accruals prior to investment. The Accounting Review, 88(6), 2117-2143. https://doi.org/10.2308/accr-50537
Matteo, P., & Francesco, P. (2018). Earnings management in developing countries. The case of Brazilian real estate industry. Academy of Accounting and Financial Studies Journal, 22(1), 1-12.
Mcnichols, M. F. (2002). Discussion of the quality of accruals and earnings: The role of accrual estimation errors. The Accounting Review, 77(s-1), 61-69. https://doi.org/10.2308/accr.2002.77.s-1.61
Morris, J. J. (2012). Survivor bias in firm specific longitudinal studies: The case of ERP systems. Journal of Business & Economics Research, 10(4), 251-256. https://doi.org/10.19030/jber.v10i4.6901
Nasab, V. B., & Shafii, H. (2015). The effects of accruals on financial constraints in Tehran Stock Exchange. European Online Journal of Natural and Social Sciences: Proceedings, 4(1(s)), 402-408.
Saifi, M. (2017). Investment opportunity and performance of manufacturing company in Indonesia. Jurnal Aplikasi Manajemen, 15(3), 522-527.
Ruan, W., Tian, G., & Ma, S. (2011). Managerial ownership, capital structure and firm value: Evidence from China’s civilian-run firms. Australasian Accounting, Business and Finance Journal, 5(3), 73-92.
Sahamok.com. (2018). Perusahaan manufaktur di BEI. Retrieved January 15th, 2018 from https://www.sahamok.com/perusahaan-manufaktur-di-bei/
Salim, M., & Yadav, R. (2012). Capital structure and firm performance: Evidence from Malaysian listed companies. Procedia-Social and Behavioral Sciences, 65(December), 156-166. https://doi.
org/10.1016/j.sbspro.2012.11.105
Setianto, R. H., & Kusumaputra, A. (2017). Corporate financial flexibility, investment activities, and cash holding: Evidence from Indonesia. Indonesian Capital Market Review, 9(2017), 75-85.
Sitompul, A. Y. S. N., Purwohedi, U., & Warokka, A. (2017). Manajemen laba: Bagaimana dampaknya terhadap IPO underpricing? Jurnal Keuangan dan Perbankan, 21(2), 228-237.
Sulistiawan, D., & Rudiawarni, F. A. (2017). Do accrual minimise (maximise) stock risk (return)?: Evidence from Indonesia. International Journal of Globalisation and Small Business, 9(1), 20-28.
Suprianto, E., & Setiawan, D. (2017). Manajemen laba di Indonesia: Studi sebuah bibliograpi. Jurnal Keuangan dan Perbankan, 21(2), 287-301.
Susanti, N., & Restiana, N. G. (2018). What’s the best factor to determining firm value? Jurnal Keuangan dan Perbankan, 22(2), 301-309.
Susanto, S., & Siregar, S. V. (2012). Corporate governance, kualitas laba, dan biaya ekuitas, studi empiris perusahaan manufaktur di Bursa Efek Indonesia tahun 2009. Jurnal Keuangan dan Perbankan, 14(2), 49-68.
Uzliawati, L., Nofianti, N., & Ratnasari, D. P. (2016). Struktur modal, investment opportunity set, likuiditas dan nilai perusahaan. Jurnal Keuangan dan Perbankan, 20(2), 195-203.
Wijaya, H., & Wardani, R. (2017). Debt and agency conflict in Indonesian manufacturing firms. Jurnal Keuangan dan Perbankan, 21(2), 211-217.
Yu, Q., Du, B., & Sun, Q. (2006). Earnings management at rights issues thresholds—Evidence from China. Journal of Banking & Finance, 30(12), 3453-3468. https://doi.org/10.1016/j.jbankfin.2006.01.011
Downloads
Published
Issue
Section
License
Authors who publish with this journal agree to the following terms:
a. Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License - Share Alike that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
b. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.
c. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work.
USER RIGHTS
All articles published Open Access will be immediately and permanently free for everyone to read and download. We are continuously working with our author communities to select the best choice of license options, currently being defined for this journal as follows: Creative Commons Attribution-Share Alike (CC BY-SA)
