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Financial Crises and Earnings Management Behavior

Arguments and Evidence Against Causality

  • Book
  • © 2018

Overview

Authors:
  1. Bruno Maria Franceschetti

    1. Department of Economics and Law, University of Macerata, Macerata, Italy

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  • Uses two different philosophical approaches, positivism and critical realism, to explore the earnings management–financial crisis relation
  • Argues that financial crises cannot be seen as the cause of earnings management
  • Casts light on managers’ reasons for acting like an earnings manager
  • Includes supplementary material: sn.pub/extras

Part of the book series: Contributions to Management Science (MANAGEMENT SC.)

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Table of contents (5 chapters)

  1. Front Matter

    Pages i-x
    Download chapter PDF

  2. Introduction

    • Bruno Maria Franceschetti
    Pages 1-13

  3. Earnings Management: Origins

    • Bruno Maria Franceschetti
    Pages 15-74

  4. A Critical Realist Perspective on Earnings Management

    • Bruno Maria Franceschetti
    Pages 75-102

  5. Financial Crisis as a Major Cause of Earnings Management: Theoretical Background and Literature Review

    • Bruno Maria Franceschetti
    Pages 103-117

  6. Does Financial Crisis Cause Earnings Management?

    • Bruno Maria Franceschetti
    Pages 119-161
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Keywords

About this book

This book approaches the question of the relation between financial crises and earnings management from two philosophical perspectives: positivism and critical realism. The results obtained using the positivist approach indicate that financial crises tend to have no consistent effect on earnings quality since managers’ earnings behavior does not differ from the pre-crisis to the crisis period. The author accordingly argues against the existence of a causal law based on a constant conjunction model (i.e., whenever a financial crisis happens, earnings management occurs) and concludes that financial crises cannot be seen as the cause of earnings management. The critical realism perspective, on the other hand, casts light on managers’ reasons for acting like an earnings manager; in conjunction with the more traditional positivist approach, it assists in refuting the idea of financial crises as a generative mechanism for earnings management. The author concludes by exploring other structures at work that might be responsible for earnings management. This book will be of interest to both academics and a wide range of professionals.

Authors and Affiliations

  • Department of Economics and Law, University of Macerata, Macerata, Italy

    Bruno Maria Franceschetti

About the author

Bruno Maria Franceschetti is an Assistant Professor at the Università degli Studi di Macerata, Macerata, Italy. He obtained a PhD in Business Administration from the University of Macerata, where he teaches Financial Analysis and Accounting. He is a Chartered Accountant and Statutory Auditor.

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