<abstract xmlns="http://www.w3.org/1999/xhtml"><bold>Background and Purpose:</bold> Models of identifying and predicting earnings management in companies by using accruals are in general based on the dependence between total assets of companies and various profit measures. In this paper, we focused on an initial dependency analysis between these business indicators in the Visegrad group’s business entities. We explore the mentioned relationships, verify, and quantify the strength of the dependencies between earnings levels of companies (in terms of economic evaluation of the return on business capital in absolute terms) and the value of their total assets (i.e. business capital tied in the assets without its further classification and analysis).<bold>Methodology</bold>: We use descriptive statistics as well as a correlation analysis based on the real business data on almost 300 thousand companies in the V4 countries from the Amadeus database, covering the period from 2013 to 2017. Finally, we use a comparative analysis to identify disproportion among the results that were found out for each of the analysed countries.<bold>Results</bold>: The analysis showed that Slovak companies have the average values of profit measures and total assets comparable to Hungarian companies. Czech and Polish companies have several times higher average values of profit measures and also of total assets than Slovak and Hungarian companies. The analysis of the development of the profit measures and the total assets of the companies over the years showed significant differences across the four countries during the period covered by this study.<bold>Conclusion:</bold> The analysis of relationships between total assets of the companies and their profit measures showed that the strength of these dependencies among countries is very similar, and over the years, these results did not change. The results of this study can be further used in the creation of the earnings management model in enterprises, both in Slovakia and in other V4 countries.</abstract>

Background and Purpose: Models of identifying and predicting earnings management in companies by using accruals are in general based on the dependence between total assets of companies and various profit measures. In this paper, we focused on an initial dependency analysis between these business indicators in the Visegrad group’s business entities. We explore the mentioned relationships, verify, and quantify the strength of the dependencies between earnings levels of companies (in terms of economic evaluation of the return on business capital in absolute terms) and the value of their total assets (i.e. business capital tied in the assets without its further classification and analysis).Methodology: We use descriptive statistics as well as a correlation analysis based on the real business data on almost 300 thousand companies in the V4 countries from the Amadeus database, covering the period from 2013 to 2017. Finally, we use a comparative analysis to identify disproportion among the results that were found out for each of the analysed countries.Results: The analysis showed that Slovak companies have the average values of profit measures and total assets comparable to Hungarian companies. Czech and Polish companies have several times higher average values of profit measures and also of total assets than Slovak and Hungarian companies. The analysis of the development of the profit measures and the total assets of the companies over the years showed significant differences across the four countries during the period covered by this study.Conclusion: The analysis of relationships between total assets of the companies and their profit measures showed that the strength of these dependencies among countries is very similar, and over the years, these results did not change. The results of this study can be further used in the creation of the earnings management model in enterprises, both in Slovakia and in other V4 countries.

Dependency Analysis Between Various Profit Measures and Corporate Total Assets for Visegrad Group’s Business Entities

Faculty of Operation and Economics of Transport and Communications, Department of Economics

Organizacija

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

Background and Purpose: Models of identifying and predicting earnings management in companies by using accruals are in general based on the dependence between...

Dependency Analysis Between Various Profit Measures and Corporate Total Assets for Visegrad Group’s Business Entities

Published Online: Mar 17, 2020

Page range: 80 - 90

Received: Sep 19, 2019

Accepted: Feb 15, 2020

DOI: https://doi.org/10.2478/orga-2020-0006

Keywords
profit measures, total assets, earnings management, correlation

© 2020 Lucia Svabova et al., published by Sciendo

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

Dependency Analysis Between Various Profit Measures and Corporate Total Assets for Visegrad Group’s Business Entities

Published Online: Mar 17, 2020

Page range: 80 - 90

Received: Sep 19, 2019

Accepted: Feb 15, 2020

DOI: https://doi.org/10.2478/orga-2020-0006

Keywordsprofit measures, total assets, earnings management, correlation

© 2020 Lucia Svabova et al., published by Sciendo

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

Keywords
profit measures, total assets, earnings management, correlation