Original title: Účetní manipulace při finančních obtížích společnosti - zohlednění daňového efektu
Translated title: Earnings Management under Financial Distress Conditions, the Effect of Tax Considerations
Authors: Britskiy, Andrey ; Novák, Jiří (advisor) ; Palanský, Miroslav (referee)
Document type: Master’s theses
Year: 2020
Language: eng
Abstract: This master thesis attempts to contribute to the existing earnings management literature by examining whether tax avoidance incentives affect opportunistic accounting choices in distress conditions. To address this issue, it investigates 2668 companies in the quarters around breach of debt covenant spanning from 1996 to 2006. This allows to analyze two distress scenarios: first, whether the companies having the opportunity to minimize tax expenses and thus improve their financial stability, would deliberately switch from engaging in aggressive upwards real earnings management to tax considerations to mitigate the potential consequences of technical default; second, whether the companies facing increased lender's scrutiny after subsequent violation are compelled to switch by the creditor. The results indicate that tax considerations do not deter misreporting in the quarters around debt covenant violation. This thesis further provides evidence against the debt covenant hypothesis: the companies in the analyzed sample engaged in negative revenue manipulation in the quarters of new breach of debt covenant and in the quarters in which the firms remained in violation. In additional analysis, it was found that the above relationship is more prominent for the companies exhibiting poor financial performance.
Keywords: Debt covenant violation; Discretionary revenues; Earnings Management; Revenue management; Tax planning; Tax sheltering

Institution: Charles University Faculties (theses) (web)
Document availability information: Available in the Charles University Digital Repository.
Original record: http://hdl.handle.net/20.500.11956/117920

Permalink: http://www.nusl.cz/ntk/nusl-412191


The record appears in these collections:
Universities and colleges > Public universities > Charles University > Charles University Faculties (theses)
Academic theses (ETDs) > Master’s theses