Earnings management to exceed thresholds: Evidence from Singapore and Thailand

Earnings play a vital role in portraying a company's economic health. Hence, executiveshave incentives to manage earnings. Motivated by Degeorge et al. [Degeorge, F., Patel, J., Zeckhauser, R., 1999. Earnings management to exceed thresholds. Journal of Business 72, 1-33] and Burgstahler and Dichev [Burgstahler, D., Dichev, I., 1997. Earnings management to avoid earnings decreases and losses. Journal of Accounting and Economics 24, 99-126], this study applies the behavioral framework developed by Degeorge et al. [Degeorge, F., Patel, J., Zeckhauser, R., 1999. Earnings management to exceed thresholds. Journal of Business 72, 1-33] to investigate earnings management to exceed thresholds in Singapore and Thailand. The empirical evidence reveals that earnings management exists in Singapore and Thailand to avoid reporting losses and negative earnings growth. This earnings management practice, however, varies between financial and non-financial firms, between Singaporean and Thai firms, and between before and after the Asian financial crisis in 1997. Moreover, corporate governance structure is found to impact the extent of earnings management to exceed thresholds in Singapore. (C) 2009 Elsevier B.V. All rights reserved.