Browsing by Author "Al-Haddad, Lara"

Now showing 1 - 4 of 4
  • Thumbnail Image
    ItemOpen Access
    Abnormal Real Activities, Meeting Earnings Targets and Firms' Future Operating Performance: Evidence from an Emerging Economy
    (Emerald, 2021-07-28) Al-Haddad, Lara; Whittington, Mark; Gerged, Ali Meftah
    This paper aims to examine the extent to which Real Earnings Management (REM) is used in Jordan to meet zero or previous year’s earnings and how this impacts the subsequent operating performance of Jordanian firms. The study used a sample of 98 Jordanian listed firms over the 2010-2018 period. To test our research hypotheses, which are formulated in accordance with both agency theory and signalling theory, multivariate regression is performed using a pooled OLS estimation. Additionally, a two-step dynamic Generalised Method of Moment (GMM) model has been estimated to address any concerns regarding the potential occurrence of endogeneity issues. Our results show that Jordanian firms that meet zero or last year’s earnings tend to exhibit evidence of real activities manipulations. More specifically, suspect firms show unusually low abnormal discretionary expenses and unusually high abnormal production costs. Further, consistent with the signalling earnings management argument, we find that abnormal real-based activities intended to meet zero earnings or previous year’s earnings potentially improve the subsequent operating performance of Jordanian firms. This implies that REM is not totally opportunistic, but it can be used to enhance the subsequent operating performance of Jordanian firms. Our findings are robust to alternative proxies and endogeneity concerns. Our findings have several implications for policymakers, regulators, audit professionals, and investors in their attempts to constrain REM practices to enhance financial reporting quality in Jordan. Managing earnings by reducing discretionary expenses appeared to be the most convenient way to manipulate earnings in Jordan. It provides flexibility in terms of time and the amount of spending. Our empirical evidence, therefore, reiterates the crucial necessity to refocus the efforts of internal and external auditors on limiting this type of manipulation to reduce the occurrence of REM activities and enhance the subsequent operating performance of listed firms in Jordan. Drawing on Al-Haddad & Whittington (2019), our evidence also urges regulators and standards setters to develop a more effective enforcement mechanism for corporate governance provisions in Jordan to minimise the likelihood of REM incidence. This study contributes to the body of accounting literature by providing the first empirical evidence in the Middle East region overall on the use of REM to meet zero or previous year earnings by Jordanian firms. Moreover, our study is the first to empirically examine the relationship between REM and Jordanian firms’ future operating performance.
  • Thumbnail Image
    ItemOpen Access
    Corporate environmental disclosure and earnings management - the moderating role of corporate governance structures
    (John Wiley and Sons Ltd, 2021-02-18) Gerged, Ali; Albitar, Khaldoon; Al-Haddad, Lara
    Our study examines whether internal corporate governance (CG) mechanisms moderate the relationship between a firm’s engagement in Corporate Environmental Disclosure (CED) and Earnings Management (EM) practices in an emerging economy. Using a sample of 100 Jordanian listed firms from 2010 to 2014 (i.e., 500 firm-year observations), our findings reveal that while the relationship between CED and earnings manipulations is negative, the links between CG arrangements and EM are heterogeneous in that they might have either reduced or increased earnings manipulations in Jordan. Furthermore, some CG structures, such as board size, managerial and institutional ownership structures, have moderating effects on the CED-EM nexus. Our research highlights the significance of considering internal CG mechanisms to explain the link between CED and EM in the context of emerging economies. Our results help to explain and place into setting the earlier mixed results on the association between CED and earnings manipulations and most importantly add to the debate about whether CG structures detrimental to the CED-EM nexus. This study allows for a richer understanding of how managers respond to CED initiatives and CG reforms in relation to reducing earnings manipulations, which offers policymakers, board directors and managers, a set of context‐specific recommendations related to the crucial need for more concerted efforts to ensure corporate sustainability in emerging economies.
  • Thumbnail Image
    ItemOpen Access
    Do Multiple Directorships Stimulate or Inhibit Firm Value? Evidence from an Emerging Economy
    (Emerald, 2022-07-04) Al-Haddad, Lara; Gerged, Ali Meftah; Saidat, Zaid; Al‑Qudah, Anas Ali; Aziz, Tariq
    Purpose: This study examines the potential influence of multiple directorships on the firm value of listed firms in Jordan. Design/methodology/approach: Using a sample of 1067 firm-year observations of Jordanian listed companies from 2010 to 2020, this study applies a pooled ordinary least squares (OLS) regression model to examine the above-stated relationship. This technique was supported by conducting a Generalized Method of Moments (GMM) estimation to address the possible occurrence of endogeneity concerns. Findings: Our results show a significant negative relationship between multiple directorships and firm performance, supporting, thereby, the “Busyness Hypothesis”, which suggests that directors with multiple directorships are expected to be over-committed, too busy, and less vigilant. Thus, their ability to effectively monitor the company management on behalf of the shareholders is quite limited. Originality/value: To the best of our knowledge, this is the first study in Jordan, and one of the very rare in the Middle Eastern and North African (MENA) region, to examine the relationship between multiple directorships and firm performance. This study provides important policy and practitioner implications in the field of corporate governance by highlighting the necessity of imposing stricter limits on the number of directorships allowed for board directors. Crucially, our empirical evidence implies that limited directorships ensure that directors are able to fulfil their board responsibilities appropriately, which is significantly associated with the firm value.
  • Thumbnail Image
    ItemOpen Access
    Managing earnings using classification shifting: Novel evidence from Jordan
    (Allied Academies, 2019-05-09) Al-Haddad, Lara; Gerged, Ali; Saidat, Zaid
    In response to McVay calls for more research to provide additional cross-sectional tests of classification shifting, the current paper examines whether Jordanian public companies engage in earnings management through classification shifting. Using a sample consisting of 112 public firms from Jordan during the 2010-2014 period, this study applies McVay (2006) Model to investigate the relationship between the non-recurring items (NREC) and the variation in unexpected core earnings (UCE). This analysis was supplemented with employing Fan et al., (2010) Model as a robustness check. Our empirical results reveal that managers in Jordan misclassify their recurring expenses to inflate their core earnings. More precisely, we find that non-recurring items (NREC) are significantly and positively associated with the variation in unexpected core earnings (UCE); thus, classification shifting is a common practice among Jordanian firms. Additionally, we find out stronger evidence on classification shifting when our sample was restricted to those firms with a more significant opportunity to misclassify recurring items (firms with positive NREC). This study contributes to the body of accounting literature by providing the first empirical evidence in the Middle East region overall on the use of classification shifting by Jordanian firms. We are also the first to apply McVay (2006) and Fan et al., (2010) models in the Middle East region. Our findings have important policy implications for standard setters, regulators, auditors and investors in their attempts to constrain earnings management practices and improve the financial reporting quality in Jordan.