Authors :
Nathan M Mataa; Dr. Taonaziso Chowa
Volume/Issue :
Volume 8 - 2023, Issue 3 - March
Google Scholar :
https://bit.ly/3TmGbDi
Scribd :
https://bit.ly/40Jz8aC
DOI :
https://doi.org/10.5281/zenodo.7800755
Abstract :
Corporations have incentive to manipulate
their financial performance with reported earnings or
net after tax income being a common target resulting in
concerns such as misallocation of funds in capital
markets and in the extreme, firms concealing possible
impending cases of corporate failure. This study was
conducted to evaluate prevalence and determinants of
earnings management amongst firms listed on the
Lusaka Securities Exchange (LuSE) using the Beneish
(1999) M-score model and establish factors that may
have contributed to the likelihood of such practices
amongst the firms for the period 2010-2019. Data for the
study was collected from annual reports of 12 out of the
17 non-service-related firms listed on the LuSE over the
period 2010-2019. Results of the study were that there
was high prevalence of earnings manipulation with
30.27% of the M-Scores calculated in the manipulator
range amongst the firms. However, of the variables
adopted as possible explanatory factors for the practice,
the study found that only the coefficients of “years
listed”, and “financial gearing” for the listed firm were
statistically significant in the empirical Probit regression
models estimated. Based on these findings, the study
recommends that LuSE and the Securities and Exchange
Commission create guidelines for the use of Generally
Accepted Accounting Practices and application of
accounting standards that minimize the likelihood of
earnings manipulation amongst listed firms. They should
also closely monitor IPOs and financial statements of
recently listed firms to curtail their tendency to
manipulate earnings.
Keywords :
Earnings Manipulation, Beneish M-Score Model, Lusaka Securities Exchange, Probit Regression
Corporations have incentive to manipulate
their financial performance with reported earnings or
net after tax income being a common target resulting in
concerns such as misallocation of funds in capital
markets and in the extreme, firms concealing possible
impending cases of corporate failure. This study was
conducted to evaluate prevalence and determinants of
earnings management amongst firms listed on the
Lusaka Securities Exchange (LuSE) using the Beneish
(1999) M-score model and establish factors that may
have contributed to the likelihood of such practices
amongst the firms for the period 2010-2019. Data for the
study was collected from annual reports of 12 out of the
17 non-service-related firms listed on the LuSE over the
period 2010-2019. Results of the study were that there
was high prevalence of earnings manipulation with
30.27% of the M-Scores calculated in the manipulator
range amongst the firms. However, of the variables
adopted as possible explanatory factors for the practice,
the study found that only the coefficients of “years
listed”, and “financial gearing” for the listed firm were
statistically significant in the empirical Probit regression
models estimated. Based on these findings, the study
recommends that LuSE and the Securities and Exchange
Commission create guidelines for the use of Generally
Accepted Accounting Practices and application of
accounting standards that minimize the likelihood of
earnings manipulation amongst listed firms. They should
also closely monitor IPOs and financial statements of
recently listed firms to curtail their tendency to
manipulate earnings.
Keywords :
Earnings Manipulation, Beneish M-Score Model, Lusaka Securities Exchange, Probit Regression
