<abstract xmlns="http://www.w3.org/1999/xhtml"><bold>Research background:</bold> The literature on the subject matter emphasizes the lack of empirical research on the relationships between accrual-based earnings management (AEM) and real earnings management (REM), while studies conducted so far are characterized by highly ambiguous results.<bold>Purpose:</bold> The main aim of the paper is to present the results of empirical research on the relationships between the <italic>AEM</italic> and <italic>REM</italic> practices used to create financial results in industrial public companies listed on the WSE.<bold>Research methodology:</bold> The research sample concerns 72 listed companies whose shares were traded on the Warsaw Stock Exchange (WSE) for a minimum 13 years in the adopted reference period of 2003–2017. The estimation of <italic>AEM</italic> and <italic>REM</italic> practices was made by using: the Jones model, the Kang-Sivaramakrishnan model and the Roychowdhury methodology.<bold>Results:</bold> The empirical results allowed showing the existence of a statistically significant, negative relationship between discretionary accruals and the abnormal level of an operational cash flow indicator, as well as between discretionary accruals and the total <italic>REM</italic> indicator. An in-depth cross-sectional analysis showed the existence of significantly differentiated relationships between the studied variables in individual branches of industry.<bold>Novelty:</bold> Research on the relationship between <italic>AEM</italic> and <italic>REM</italic> practices in the context of the Polish capital market has not been carried out so far, hence it can be considered a new research area in which there is a justified need to deepen theoretical and empirical research on the <italic>EM</italic> phenomenon.</abstract>

Research background: The literature on the subject matter emphasizes the lack of empirical research on the relationships between accrual-based earnings management (AEM) and real earnings management (REM), while studies conducted so far are characterized by highly ambiguous results.Purpose: The main aim of the paper is to present the results of empirical research on the relationships between the AEM and REM practices used to create financial results in industrial public companies listed on the WSE.Research methodology: The research sample concerns 72 listed companies whose shares were traded on the Warsaw Stock Exchange (WSE) for a minimum 13 years in the adopted reference period of 2003–2017. The estimation of AEM and REM practices was made by using: the Jones model, the Kang-Sivaramakrishnan model and the Roychowdhury methodology.Results: The empirical results allowed showing the existence of a statistically significant, negative relationship between discretionary accruals and the abnormal level of an operational cash flow indicator, as well as between discretionary accruals and the total REM indicator. An in-depth cross-sectional analysis showed the existence of significantly differentiated relationships between the studied variables in individual branches of industry.Novelty: Research on the relationship between AEM and REM practices in the context of the Polish capital market has not been carried out so far, hence it can be considered a new research area in which there is a justified need to deepen theoretical and empirical research on the EM phenomenon.

The Relationship Between Accrual-Based Earnings Management and Real Earnings Management: Reference to the Polish Capital Market

Faculty of Economics and Sociology, Department of Business Analysis and Strategy

Folia Oeconomica Stetinensia

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Research background: The literature on the subject matter emphasizes the lack of empirical research on the relationships between accrual-based earnings...

The Relationship Between Accrual-Based Earnings Management and Real Earnings Management: Reference to the Polish Capital Market

Published Online: Jan 29, 2021

Page range: 66 - 81

Received: Jan 06, 2020

Accepted: Sep 26, 2020

DOI: https://doi.org/10.2478/foli-2020-0036

Keywords
accrual-based earnings management, real earnings management, industrial listed companies, the Warsaw Stock Exchange

© 2020 Michał Comporek, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The Relationship Between Accrual-Based Earnings Management and Real Earnings Management: Reference to the Polish Capital Market

Published Online: Jan 29, 2021

Page range: 66 - 81

Received: Jan 06, 2020

Accepted: Sep 26, 2020

DOI: https://doi.org/10.2478/foli-2020-0036

Keywordsaccrual-based earnings management, real earnings management, industrial listed companies, the Warsaw Stock Exchange

© 2020 Michał Comporek, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
accrual-based earnings management, real earnings management, industrial listed companies, the Warsaw Stock Exchange