Earnings Management Practice in Bangladesh

Keywords: Beneish Model, Bangladesh, Detecting, Earnings Management, Industry.

Abstract

This paper detects the existence of Earnings Management (EM) practice in Bangladesh. Total 105 manufacturing companies have been chosen from the different industrial sectors such as pharmaceuticals & chemicals, food & allied, cement, engineering, ceramics, tannery, textile & clothing, paper & printing, jute, fuel & power and miscellaneous. The well-known Beneish M score model has been used in detecting EM. The outcome shows that the percentage of non- manipulator companies is greater than manipulator companies except cement, paper & printing and jute industry. All out 39 % of manufacturing companies are likely manipulator where industry-wise pharmaceuticals & chemicals 28 % , food & allied 42%, cement 80%, engineering 42% , ceramics 0%  , tannery 33% , textile & clothing 40 % , paper & printing 100%, jute 100% , fuel & power 25 % and miscellaneous 17% of manufacturing organizations are likely to be manipulator for 2017. This paper may help the stakeholder for distinguishing between likely and non-likely manipulator companies from the different industrial sectors, making a better decision and formulating policy to reduce the likelihood of manipulation. As Beneish Model is a probabilistic model, it is not unquestionably decisive from the identification that organizations are likely manipulators.

References

Aghghaleh, S. F., Mohamed, Z. M., & Rahmat, M. M. (2016). Detecting Financial Statement Frauds in Malaysia: Comparing the Abilities of Beneish and Dechow Models, Asian Journal of Accounting and Governance, 7, 57–65.

Ahmed, H., & Azim, M. (2015). Earnings Management Behavior: A Study on the Cement Industry of Bangladesh, International Journal of Management, Accounting and Economics, 2 (4), 265-276.

Ahmed, T., & Naima, J. (2016). Detection and Analysis of Probable Earnings Manipulation by Firms in a Developing Country, Asian Journal of Business and Accounting, 59-81.

Anh, N. H., & Linh, N. H. (2016). Using the M-score Model in Detecting Earnings Management: Evidence from Non-Financial Vietnamese Listed Companies, VNU Journal of Science: Economics and Business, 32 (2), 14-23.

Beneish, M. D. (1999). The Detection of Earnings Manipulation, Financial Analysts Journal, 24-36.

Beneish, M. D. (2001). Earnings Management: A Perspective. Managerial Finance, 27 (12) , 3-17.

Bhuiyan, M. H. (2015). Earnings Management to Exceed Earnings Threshold: Evidence from Bangladesh, Journal of Business Studies, XXXVI (3), 1-22.

Carruth, P. J. (2011). Earnings Management: The Role Of Accounting Professionals, International Business & Economics Research Journal, 1 (3), 9-14.

Kamal, M. E., Salleh, M. F., & Ahmad, A. (2016). Detecting Financial Statement Fraud by Malaysian Public Listed Companies: The Reliability of the Beneish M-Score Model, Journal Pengurusan, 46, 23 - 32.

Khan, A. R., & Akter, M. (2017). An Analysis of Earnings Management: Evidence from Food & Allied Industry of Bangladesh, International Journal of Accounting and Financial Reporting, 7 (2), 359-372.

Leuza, C., Nandab, D., & Wysocki, P. D. (2013). Earnings management and investor protection: an international comparison, Journal of Financial Economics, 69, 505–527.

Mehta, A., & Bhavani, G. (2017). Application of Forensic Tools to Detect Fraud: The Case of Toshiba, Journal of Forensic and Investigative Accounting,9(1), 692-710.

Omar, N., Koya, R. K., Sanusi, Z. M., & Shafie, N. A. (2014). Financial Statement Fraud: A Case Examination Using Beneish Model and Ratio Analysis, International Journal of Trade, Economics and Finance,5 (2), 184-186.

Paolone, F., & Magazzino, C. (2014). Earnings Manipulation among the Main Industrial Sectors Evidence from Italy, Economia Aziendale Online, 5 (4), 253-261.

Razzaque, R. M., Rahman, M. Z., & Salat, A. (2006). Earnings Management: An Analysis on Textile Sector of Bangladesh, The Cost and Management,34 (5), 5-13.

Roy, C., & Debnath, P. (2015). Earnings Management Practices in Financial Reporting of Public Enterprises in India: An Empirical Test with M-Score.

Talab, H. R., Flayyih, H. H., & Ali, S. I. (2017). Role of Beneish M-score Model in Detecting of Earnings Management Practices: Empirical Study in Listed Banks of Iraqi Stock Exchange, International Journal of Applied Business and Economic Research, 15 (23), 287-302.

Tarjo, & Herawati, N. (2015). Application of Beneish M-Score Models and Data Mining to Detect Financial Fraud, Procedia - Social and Behavioral Sciences, 211, 924 – 930.

Published
2020-03-01
How to Cite
Parvin, R. (2020). Earnings Management Practice in Bangladesh. International Journal of Business and Management Future, 4(1), 27-32. https://doi.org/10.46281/ijbmf.v4i1.492