Earnings management: a study of credit institutions in Hungary 1999-2012

Beretka, Endre (2016) Earnings management: a study of credit institutions in Hungary 1999-2012. Doctoral thesis, Anglia Ruskin University.

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Abstract

After the fall of the communist regime in Hungary, the country went through a transitional change. As a result, new financial reporting and accounting standards were put forward for adoption by Parliament in compliance with pertaining European and international legislation. The examination of credit institutions’ financial statements is an unexplored area in Hungary. This study set out to investigate their annual financial reports to seek evidence if credit institutions, both large and small by assets size, avoided earnings decreases and/or engaged in earnings management (EM) prior to and after the 2008 financial crisis. The Burgstahler and Dichev (1997), Degeorge, Patel and Zeckhauser (1999) models and Kolmogorov-Smirnov, Monte-Carlo Method, accrual, benchmark and distributional tests were used to study credit institutions financial statements for the period of 1999-2012. A total of 16 banking industry specific ratios were selected to analyse credit institution’s annual financial statements. Four hypotheses were tested with three empirical testing approaches with 95% and 99% confidence intervals and 0.05 and 0.01 significance levels. The findings of this study confirm that foreign and domestic credit institutions trading in Hungary, regardless of their size, not only managed their earnings but also avoided earnings decreases both prior to and after the 2008 financial crisis. Additionally, 7 out of the 16 tested ratios do not contain total assets; therefore, they do not suffer from a possible reverse accruals effect. The application of non-accruals base ratios for statistical testing may increase the power of the test. The conclusion and the original contribution this study provides to the pool of knowledge on the subject in question adds new evidence to existing literature on earnings management by being the first to examine as well as to provide significant evidence on earnings management of foreign and domestic credit institutions trading in Hungary, an ex-communist Eastern European economy.

Item Type: Thesis (Doctoral)
Keywords: assets size, earnings decreases, 2008 financial crisis, financial ratios, accrual, benchmark and distributional tests, Kolmogorov-Smirnov, Monte-Carlo tests
Faculty: Theses from Anglia Ruskin University
Depositing User: Unnamed user with email melissa.campey@anglia.ac.uk
Date Deposited: 12 Apr 2017 11:39
Last Modified: 12 Apr 2017 11:39
URI: http://arro.anglia.ac.uk/id/eprint/701683

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