Cosmetic Accounting Practices among Jordanian Firms? The Role of Ownership Concentration and Political Influence.

  • Deaa Al-Deen Al-Sraheen Al-Zaytoonah University of Jordan, Business Faculty, Department of Accounting
  • Raneem Mohammed Saleh Accounting Program, Al-Zaytoonah University of Jordan
  • Mohammad Husain Alsmadi Al-Zaytoonah University of Jordan, Business Faculty, Department of Accounting
Keywords: Cosmetic Accounting, Earnings Quality, Ownership Concentration, Political Influence

Abstract

Cosmetic accounting is a process used by accountants who have a vast knowledge of accounting rules to address the figures reported in the financial reports. This study focuses on the crucial role of the concentration of ownership and the political influence on the quality of earnings among Jordanian industrial firms listed on the ASE during the period 2014-2017. The results of regression indicate that there is a negative impact of both of ownership concentration and political connection on the quality of earnings reported in financial reports. This means that the most significant shareholders use their power, and the political role of board members to manipulate earnings to be consistent with their interests. The study found that other important factors may affect the quality of earnings such as foreign ownership, especially with the migration of some capital to Jordan as a safe environment for investment, particularly under the political and economic tension in neighboring countries.

References

[1] Al-Jaifi, Hamdan Amer. "Ownership concentration, earnings management, and stock market liquidity: evidence from Malaysia." Corporate Governance: The international journal of business in society 17, no. 3 (2017): 490-510.
[2] Al-Jaifi, Hamdan Amer. "Ownership concentration, earnings management, and stock market liquidity: evidence from Malaysia." Corporate Governance: The international journal of business in society 17, no. 3 (2017): 490-510.
[3] Al-Sraheen, D. A.-D., & Alkhatib, K. Proposing a model for limiting earning management practices: The case of Jordanian listed firms. Corporate Board: role, duties and composition, 12(3) (2016), 81-84. doi.org/10.22495/cbv12i3art9
[4] Al-Sraheen, Dea’a Al-Deen, and Saleh, Isam Hamad. "Does the monitoring mechanisms considered as dilemma against the practices of earnings management." International Business Research 10, no. 10 (2017): 39-44. doi.org/10.5539/ibr.v10n10p39
[5] Al-Sraheen, Dea’a, and Khaldoon Ahmad Al Daoud. "Does the presence of independent directors reduce the practices of earnings management? The moderating role of family ownership concentration." Ekonomski pregled 69, no. 6 (2018): 638-654. doi.org/10.32910/ep.69.6.2
[6] Al-Sraheen, Dea’a, Fadzil, Faudziah Hanim Bt, and Syed Soffian Bin Syed Ismail. "The Influence of Corporate Ownership Structure and Board Members' Skills on the Accounting Conservatism: Evidence from Non-Financial Listed Firms in Amman Stock Exchange." International Journal of Accounting and Financial Reporting 4, no. 1 (2014): 177. doi.org/10.5296/ijafr.v4i1.5661
[7] Bouvatier, Vincent, Laetitia Lepetit, and Frank Strobel. "Bank income smoothing, ownership concentration, and the regulatory environment." Journal of Banking & Finance 41 (2014): 253-270.
[8] Bouvatier, Vincent, Laetitia Lepetit, and Frank Strobel. "Bank income smoothing, ownership concentration, and the regulatory environment." Journal of Banking & Finance 41 (2014): 253-270.
[9] Daoud, Al, Khaldoon Ahmad, Dea'A. Al-Deen Al-Sraheen, and Mahmoud Mohmad Aleqab. "Does CEO Duality and Family Ownership Concentration Hinder the Effectiveness of the Corporate Board of Directors in Jordanian Service Firms?." JOURNAL OF ENVIRONMENTAL ACCOUNTING AND MANAGEMENT 6, no. 2 (2018): 95-104. doi.org/10.5890/jeam.2018.06.001
[10] Darmadi, Salim. "Ownership concentration, family control, and auditor choice: Evidence from an emerging market." Asian Review of Accounting 24, no. 1 (2016): 19-42.
[11] Dechow, Patricia, Weili Ge, and Catherine Schrand. "Understanding earnings quality: A review of the proxies, their determinants, and their consequences." Journal of Accounting and Economics 50, no. 2-3 (2010): 344-401.
[12] Faccio, Mara. "Politically connected firms." American economic review 96, no. 1 (2006): 369-386.
[13] Hair, J. F., Black, W. C., Babin, B. J., Anderson, R. E., & Latham, R. Multivariate data analysis (7th ed). New Jersey: Pearson3. (2010).
[14] Hashim, Hafiza Aishah, and Susela Devi. "Board characteristics, ownership structure, and earnings quality: Malaysian evidence." Research in Accounting in Emerging Economies 8, no. 97 (2008): 97-123.
[15] Karim, Asif Mahbub, Rehana Fowzia, and Md Mamunur Rashid. "Cosmetic accounting practices in developing countries: Bangladesh perspectives." World Journal of Social Sciences 1, no. 3 (2011): 1-15.
[16] Kumar, Surya Bhushan, Vinay Goyal, and S. K. Mitra. "The relationship between earnings round up/down and the global financial crisis: evidence from BRICS markets." Asia-Pacific Journal of Accounting & Economics (2019): 1-24.
[17] Liu, Ye, Xindan Li, Haijian Zeng, and Yunbi An. "Political connections, auditor choice, and corporate accounting transparency: evidence from private sector firms in China." Accounting & Finance 57, no. 4 (2017): 1071-1099.
[18] Maswadeh, Sanaa. "The effect of the ownership structure on earnings management practices." Investment Management and Financial Innovations 15, no. 4 (2018): 48-60.
[19] Mohammed, N. F., Ahmed, K., & Ji, X. D. Accounting conservatism, corporate governance, and political influence: evidence from Malaysia. In SSRN. COM/ABSTRACT (Vol. 1416485) (2010).
[20] Nawaiseh, Mohammad Ebrahim. "Impact of External Audit Quality on Earnings Management by Banking Firms: Evidence from Jordan." British Journal of Applied Science & Technology12, no. 2 (2016): 1.
[21] Persakis, Antonios. "Earnings quality under the financial crisis of 2008: A global empirical investigation." Ph.D. diss., University of Thessaly, 2018.
[22] Rozanski, Abbey. "Corporate Political Activity, CEO Hubris, and Earnings Management." (2017).
[23] Wang, Kun, and Greg Shailer. "Ownership concentration and firm performance in emerging markets: A meta‐analysis." Journal of Economic Surveys 29, no. 2 (2015): 199-229.
[24] Yuan, Tangmei, and Guirong Wang. "Ownership Concentration and Environmental Information Disclosures." In 3rd International Conference on Judicial, Administrative and Humanitarian Problems of State Structures and Economic Subjects (JAHP 2018). Atlantis Press, 2018.
Published
2019-06-28
How to Cite
Al-Deen Al-Sraheen, D., Saleh, R. M., & Alsmadi, M. H. (2019). Cosmetic Accounting Practices among Jordanian Firms? The Role of Ownership Concentration and Political Influence. Review of Applied Socio-Economic Research, 17(1), 34-41. Retrieved from https://www.reaser.eu/ojs/ojs-3.1.2-1/index.php/REASER/article/view/5