Remodelling the Earnings Management with the Appearance of Leverage, Financial Distress and Free Cash Flow: Malaysia and Thailand Evidences

• Published in: Journal of applied sciences (Asian Network for Scientific Information) Vol. 14; no. 21; pp. 2644 - 2661
• Main Authors: Selahudin, Nor Farhana, Zakaria, Nor Balkish, Sanusi, Zuraidah Mohd
• Format: Journal Article
• Language: English
• Published: 15.10.2014
• Subjects: Financial management; Guidelines; Management; Profits; Regulators; Remodeling; Sensitivity analysis; Thailand
• ISSN: 1812-5654; 1812-5662
• DOI: 10.3923/jas.2014.2644.2661

This study examines the relationships between earnings management with leverage, financial distress and free cash flow for both Malaysia and Thailand. The main focus of this study is on accruals earnings management which proxy by discretionary accruals. Data is based on 335 public listed companies in Malaysia and 224 public listed companies in Thailand period from 2010-2012. The study finds that the different in mean for leverage, financial distress and earnings management between Malaysia and Thailand is significant. The study also shows that financial distress has a significant impact on earnings management for Malaysia, Thailand and full set sample of test. However, there are mix support for relationship between earnings management with leverage and free cash flow. The sensitivity analysis provides mix supports when using different earnings management detection model. These results should be of interest to public listed companies, regulators and various stakeholders to assist proper guideline and understanding on earnings management.