THE EFFECT OF FINANCIAL PERFORMANCES ON EARNINGS QUALITY OF SERBIAN HOTELS
Ivana Bešlić Rupić - Alfa BK University, 3 Palmira Toljatija, 11070 Belgrade, Serbia
Dragana Bešlić Obradović - Alfa BK University, 3 Palmira Toljatija, 11070 Belgrade, Serbia
Bojan Rupić - Kapital revizija doo, 1 Vojvode Mišića, 21000 Novi Sad, Serbia
DOI: https://doi.org/10.31410/tmt.2020.333
5th International Thematic Monograph - Modern Management Tools and Economy of Tourism Sector in Present Era, Belgrade, 2020, Published by: Association of Economists and Managers of the Balkans in cooperation with the Faculty of Tourism and Hospitality, Ohrid, North Macedonia; ISSN 2683-5673, ISBN 978-86-80194-42-4; Editors: Vuk Bevanda, associate professor, Faculty of Social Sciences, Belgrade, Serbia; Snežana Štetić, full time professor, The College of Tourism, Belgrade, Serbia, Printed by: SKRIPTA International, Belgrade
Abstract: This study examines the effect of financial performances on earnings quality using a sample of Serbian hotels during the period 2015-2019. First, the authors build a multidimensional measure of earnings quality including attributes as the hotel’s going concerned, size, current liquidity, age, profitability, and leverage. Second, the authors examine variables that are potentially associated with earnings quality. The methodology includes descriptive statistics, univariate test, correlation matrix for the variables, multivariate regression, F-test. This paper presents managerial implications for professionals, users of financial statements, and academics.
Keywords: Earnings quality, Earnings management, Financial performances, Serbian hotels.
REFERENCES
Aharony, J., Barniv, R., & Falk, H. (2010). The impact of mandatory IFRS adoption on equity valuation of
accounting numbers for security investors in the EU. European Accounting Review, 19(3), 535-578.
Altman, A. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The
Journal of Finance, 23(4), 589-609.
Anwer, S.A., Michael J.N., & Dechun, W. (2013). Does mandatory adoption of IFRS improve accounting
quality? Preliminary Evidence. Contemporary Accounting Research, 30(4), 1344-1372.
Avci, U., Madanoglu, M., & Okumus F. (2011). Strategic orientation and performance of tourism firms:
Evidence from a developing country. Tourism Management, 32(1), 147-157.
Ball, R., Robin, A., & Wu, J.S. (2003). Incentives versus standards: properties of accounting income in
four East Asian countries. Journal of Accounting and Economics, 36(1), 235-270. DOI: 10.1016/j.
jacceco.2003.10.003.
Barker, R., & Imam, S. (2008). Analysts’ perceptions of earnings quality. Accounting and Business Research,
38(4), 313-329.
Baxter, P., & Cotter, J. (2009). Audit committees and earnings quality. Accounting & Finance, 49(2), 267-
290.
Becker, C.L., DeFond, M.L., Jiambalvo, J., & Subramanyam, K.R. (1998). The effect of audit quality on
earnings management. Contemporary Accounting Research, 15(1), 1-24.
Biddle, G.C., Hillary, G., & Verdi, R.S. (2009). How does financial reporting quality relate to investment
efficiency. Journal of Accounting and Economics, 43(2-3), 112-131.
Bodie, Z., Kane, A., & Marcus, A.J. (2013). Investments, Singapore: Global Edition ed., McGraw-Hill/
Irwin.
Burca, V., & Mates, D. (2015). Implications of IFRS adoption on earnings quality, empirical case for Romanian
environment. Annales Universitatis Apulensis Series Oeconomica, 1(17), 1-5.
Callao, S., Jarne, J., & Wroblewski, D. (2014a). Debates and studies on earnings management: a geographical
perspective. Theoretical Journal of Accounting (Zeszyty Teoretyczne Rachunkowości), 75, 145-
169.
Callao, S., Jarne, J., & Wroblewski, D. (2014b). The development of earnings management research. A
review of literature from three different perspectives. Theoretical Journal of Accounting (Zeszyty
Teoretyczne Rachunkowości), 79, 135-177.
Callao, S., Jarne, J.I., & Wróblewski, D. (2019). A new perspective on earnings management in emerging
European countries: Investigation on environmental factors that explain differences in earnings
management. Journal of Accounting, Business and Finance Research, 7(2), 59-81.
Caramanis, C., & Lennox, C. (2008). Audit effort and earnings management. Journal of Accounting and
Economics, 45, 116-138.
Center for the Financial Reporting Reform. (2015). Report on the Observance of Standards and Codes on
Accounting and Auditing - Republic of Serbia. Vienna, Austria: World Bank
Chan, K., Chan, L., Jegadeesh, L. & Lakonishok, J. (2006). Earnings quality and stock returns. Journal of
Business, 79, 1041–1082.
Chung, R., Firth, M., & Kim, J.B. (2002). Institutional monitoring and opportunistic earnings management.
Journal of Corporate Finance, 8(1), 29-48.
Cohen, J.W. (1988). (2nd ed.). Statistical Power Analysis for the Behavioral Sciences. Hillsdale, NJ: Lawrence
Erlbaum Associates.
Deegan, C. (1996). Australian Financial Accounting, Sydney: McGraw-Hill.
Djate, A., Gao, G., Sarikas, R., Senteney, L.D. (2011). Eastern and Western European firms public and private
information quality: The comparative impact of degree of implementation of IFRS. Emerging
Markets Review, 12(2), 111-129.
Gaio, C. (2010). The relative importance of firm and country characteristics for earnings quality around the
world. European Accounting Review, 19(4), 693-738.
Gombolaa, J.M., Amy, H., Chin-Chuan, H. (2016). The effect of leverage and liquidity on earnings and
capital management: Evidence from U.S. commercial banks. International Review of Economics
and Finance, 43(1), 35-58. https://doi.org/10.1016/j.iref.2015.10.03.
Hai-Yen C., Li-Heng L., Hui-Fun Y. (2019). Market power, competition and earnings management: accrual-
based activities. Journal of Financial Economic Policy, 11(3), 368-384.
Healy, P.M. (1999). Discussion of earnings-based bonus plans and earnings management by business unit
managers. Journal of Accounting and Economics, 26(1-3), 143-147.
Iatridis, G., & Kadorinis, G. (2009). Earnings management and firm financial motives: A financial investigation
of UK listed firms. International Review of Financial Analysis, 18(4), 164-173.
Indracahya, E., & Anggraini, D. (2017). The effect of good corporate governance elements, leverage, firm
age, company size and profitability on earning management (empirical study of manufacturing companies
in Bei 2014 – 2016). Profita, 10(2), 203–227.
Itoh, K. (2007). Corporate Valuation, Tokyo: Nihon Keizai Shimbun-sha.
Jayaraman, S. (2008). Earnings volatility, cash flow volatility, and informed trading. Journal of Accounting
Research, 46(4), 809-851.
Kalaš, B., Mirović, V., Pavlović, N. (2019). Profitability determinants of hotel industry in AP Vojvodina. In
V. Bevanda & S. Štetić (Eds.), 4th International Thematic Monograph: Modern Management Tools
and Economy of Tourism Sector in Present Era (pp. 47-62). Belgrade: Association of Economists
and Managers of the Balkans with Faculty of Tourism and Hospitality, Ohrid, North Macedonia.
https://doi.org/10.31410/tmt.2019.
Kalayci, S. (2005). (1st ed.). SPSS Applications, Multi-variables Statistics Techniques. Ankara Turkey:
Asil Publish.
Khalil, M. & Simon, J. (2014). Efficient contracting, earnings smoothing and managerial accounting discretion.
Journal of Applied Accounting Research, 15 (1), 100-123.
Kirschenheiter, M., & Melumad, N. (2004). Earnings’ quality and smoothing. Working paper Columbia
Business School. Retrieved from: https://pdfs.semanticscholar.org/71eb/7322d59bee32d20ec-
789cd809575eedea9d7.pdf.
Klein, A. (2002). Audit committee, board of director characteristics, and earnings management. Journal
of Accounting and Economics, 33(3), 375-401.
Koch, B.S. (1981). Income smoothing: An experiment. The Accounting Review, 56, 574-586.
Leuz, C., Nanda, D.J., & Wysocki, P. (2003). Earnings management and investor protection: An international
comparison. Journal of Financial Economics, 69(3), 505-527.
Miller, E.J. (2009). The development of the Miller ratio (MR): A tool to detect for the possibility of earnings
management (EM). Journal of Business & Economics Research, 7(1), 79-90.
Mohammadi, F., & Amini, P. (2016). Investigating the Relationship between financial distress and earnings
management in corporations of accepted in Tehran Stock Exchange. International Academic
Journal of Accounting and Financial Management, 3(6), 41- 50.
Morteza, A., Daryosh J., & Hosin S. (2014). The relationship between pay policy dividends and earnings
quality firms. International Research Journal of Applied and Basic Sciences, 8(6), 667-674.
Park, Y.W., & Shin, H.H. (2004). Board Composition and Earnings Management in Canada. Journal of
Corporate Finance, 10(3), 431-457.
Parte-Esteban, L., & Devesa, M.J. (2011). Earnings management in the Spanish hotel industry. Cornell
Hospitality Quarterly, 52(4), 466-479.
Rahman, M.M., Moniruzzaman, M., & Sharif, M.J. (2013). Techniques, motives and controls of earnings
management. International Journal of Information Technology and Business Management, 11(1),
22-34.
Ratnanigrum, R. (2016). The influence of profitability and income tax on income smoothing rankings.
Jurnal Bisnis & Manajemen, 17(2), 133-143.
Ronen, J., Tzur, J., & Yaari, V. L. (2006). The effect of directors’ equity incentives on earnings management.
Journal of Accounting and Public Policy, 25(4), 359-389.
Roychowdhury, S. (2006). Earnings management through real activities manipulation. Journal of Accounting
and Economics, 42(3), 335-370.
Schipper, K. (1989). Commentary on earnings management. Accounting Horizons, 3(4), 91-102.
Scott, W.R. (2009). (Fifth ed.). Financial accounting theory. Prentice Hall, New Jersey: Upper Saddle
River.
Tapia, A.B., & Taskón Fernández, M. (2011). Accruals, cash flows and earnings in European privately held
firms. Pecvnia Monográfico, 133-156.
Watts, R., & Zimmerman, J. (1986). Positive accounting theory, Englewood Cliffs, New Jersey: Prentice
Hall.
Watts, R.L. & Zimmerman, J.L. (1990). Positive accounting theory: A ten year perspective. Accounting
Review, 65(1), 131-156.
Wijesinghe, R., & Kehelwalatenna, S. (2017). The impact of earnings quality on the stock returns of listed
manufacturing companies in the Colombo Stock Exchange. Colombo Business Journal International
Journal of Theory and Practice, 8(2), 69-89.
Wruck, K. H. (1990). Financial distress, reorganization, and organizational efficiency. Journal of Financial
Economics, 27(2), 419-444.
Keywords: Earnings quality, Earnings management, Financial performances, Serbian hotels.
REFERENCES
Aharony, J., Barniv, R., & Falk, H. (2010). The impact of mandatory IFRS adoption on equity valuation of
accounting numbers for security investors in the EU. European Accounting Review, 19(3), 535-578.
Altman, A. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The
Journal of Finance, 23(4), 589-609.
Anwer, S.A., Michael J.N., & Dechun, W. (2013). Does mandatory adoption of IFRS improve accounting
quality? Preliminary Evidence. Contemporary Accounting Research, 30(4), 1344-1372.
Avci, U., Madanoglu, M., & Okumus F. (2011). Strategic orientation and performance of tourism firms:
Evidence from a developing country. Tourism Management, 32(1), 147-157.
Ball, R., Robin, A., & Wu, J.S. (2003). Incentives versus standards: properties of accounting income in
four East Asian countries. Journal of Accounting and Economics, 36(1), 235-270. DOI: 10.1016/j.
jacceco.2003.10.003.
Barker, R., & Imam, S. (2008). Analysts’ perceptions of earnings quality. Accounting and Business Research,
38(4), 313-329.
Baxter, P., & Cotter, J. (2009). Audit committees and earnings quality. Accounting & Finance, 49(2), 267-
290.
Becker, C.L., DeFond, M.L., Jiambalvo, J., & Subramanyam, K.R. (1998). The effect of audit quality on
earnings management. Contemporary Accounting Research, 15(1), 1-24.
Biddle, G.C., Hillary, G., & Verdi, R.S. (2009). How does financial reporting quality relate to investment
efficiency. Journal of Accounting and Economics, 43(2-3), 112-131.
Bodie, Z., Kane, A., & Marcus, A.J. (2013). Investments, Singapore: Global Edition ed., McGraw-Hill/
Irwin.
Burca, V., & Mates, D. (2015). Implications of IFRS adoption on earnings quality, empirical case for Romanian
environment. Annales Universitatis Apulensis Series Oeconomica, 1(17), 1-5.
Callao, S., Jarne, J., & Wroblewski, D. (2014a). Debates and studies on earnings management: a geographical
perspective. Theoretical Journal of Accounting (Zeszyty Teoretyczne Rachunkowości), 75, 145-
169.
Callao, S., Jarne, J., & Wroblewski, D. (2014b). The development of earnings management research. A
review of literature from three different perspectives. Theoretical Journal of Accounting (Zeszyty
Teoretyczne Rachunkowości), 79, 135-177.
Callao, S., Jarne, J.I., & Wróblewski, D. (2019). A new perspective on earnings management in emerging
European countries: Investigation on environmental factors that explain differences in earnings
management. Journal of Accounting, Business and Finance Research, 7(2), 59-81.
Caramanis, C., & Lennox, C. (2008). Audit effort and earnings management. Journal of Accounting and
Economics, 45, 116-138.
Center for the Financial Reporting Reform. (2015). Report on the Observance of Standards and Codes on
Accounting and Auditing - Republic of Serbia. Vienna, Austria: World Bank
Chan, K., Chan, L., Jegadeesh, L. & Lakonishok, J. (2006). Earnings quality and stock returns. Journal of
Business, 79, 1041–1082.
Chung, R., Firth, M., & Kim, J.B. (2002). Institutional monitoring and opportunistic earnings management.
Journal of Corporate Finance, 8(1), 29-48.
Cohen, J.W. (1988). (2nd ed.). Statistical Power Analysis for the Behavioral Sciences. Hillsdale, NJ: Lawrence
Erlbaum Associates.
Deegan, C. (1996). Australian Financial Accounting, Sydney: McGraw-Hill.
Djate, A., Gao, G., Sarikas, R., Senteney, L.D. (2011). Eastern and Western European firms public and private
information quality: The comparative impact of degree of implementation of IFRS. Emerging
Markets Review, 12(2), 111-129.
Gaio, C. (2010). The relative importance of firm and country characteristics for earnings quality around the
world. European Accounting Review, 19(4), 693-738.
Gombolaa, J.M., Amy, H., Chin-Chuan, H. (2016). The effect of leverage and liquidity on earnings and
capital management: Evidence from U.S. commercial banks. International Review of Economics
and Finance, 43(1), 35-58. https://doi.org/10.1016/j.iref.2015.10.03.
Hai-Yen C., Li-Heng L., Hui-Fun Y. (2019). Market power, competition and earnings management: accrual-
based activities. Journal of Financial Economic Policy, 11(3), 368-384.
Healy, P.M. (1999). Discussion of earnings-based bonus plans and earnings management by business unit
managers. Journal of Accounting and Economics, 26(1-3), 143-147.
Iatridis, G., & Kadorinis, G. (2009). Earnings management and firm financial motives: A financial investigation
of UK listed firms. International Review of Financial Analysis, 18(4), 164-173.
Indracahya, E., & Anggraini, D. (2017). The effect of good corporate governance elements, leverage, firm
age, company size and profitability on earning management (empirical study of manufacturing companies
in Bei 2014 – 2016). Profita, 10(2), 203–227.
Itoh, K. (2007). Corporate Valuation, Tokyo: Nihon Keizai Shimbun-sha.
Jayaraman, S. (2008). Earnings volatility, cash flow volatility, and informed trading. Journal of Accounting
Research, 46(4), 809-851.
Kalaš, B., Mirović, V., Pavlović, N. (2019). Profitability determinants of hotel industry in AP Vojvodina. In
V. Bevanda & S. Štetić (Eds.), 4th International Thematic Monograph: Modern Management Tools
and Economy of Tourism Sector in Present Era (pp. 47-62). Belgrade: Association of Economists
and Managers of the Balkans with Faculty of Tourism and Hospitality, Ohrid, North Macedonia.
https://doi.org/10.31410/tmt.2019.
Kalayci, S. (2005). (1st ed.). SPSS Applications, Multi-variables Statistics Techniques. Ankara Turkey:
Asil Publish.
Khalil, M. & Simon, J. (2014). Efficient contracting, earnings smoothing and managerial accounting discretion.
Journal of Applied Accounting Research, 15 (1), 100-123.
Kirschenheiter, M., & Melumad, N. (2004). Earnings’ quality and smoothing. Working paper Columbia
Business School. Retrieved from: https://pdfs.semanticscholar.org/71eb/7322d59bee32d20ec-
789cd809575eedea9d7.pdf.
Klein, A. (2002). Audit committee, board of director characteristics, and earnings management. Journal
of Accounting and Economics, 33(3), 375-401.
Koch, B.S. (1981). Income smoothing: An experiment. The Accounting Review, 56, 574-586.
Leuz, C., Nanda, D.J., & Wysocki, P. (2003). Earnings management and investor protection: An international
comparison. Journal of Financial Economics, 69(3), 505-527.
Miller, E.J. (2009). The development of the Miller ratio (MR): A tool to detect for the possibility of earnings
management (EM). Journal of Business & Economics Research, 7(1), 79-90.
Mohammadi, F., & Amini, P. (2016). Investigating the Relationship between financial distress and earnings
management in corporations of accepted in Tehran Stock Exchange. International Academic
Journal of Accounting and Financial Management, 3(6), 41- 50.
Morteza, A., Daryosh J., & Hosin S. (2014). The relationship between pay policy dividends and earnings
quality firms. International Research Journal of Applied and Basic Sciences, 8(6), 667-674.
Park, Y.W., & Shin, H.H. (2004). Board Composition and Earnings Management in Canada. Journal of
Corporate Finance, 10(3), 431-457.
Parte-Esteban, L., & Devesa, M.J. (2011). Earnings management in the Spanish hotel industry. Cornell
Hospitality Quarterly, 52(4), 466-479.
Rahman, M.M., Moniruzzaman, M., & Sharif, M.J. (2013). Techniques, motives and controls of earnings
management. International Journal of Information Technology and Business Management, 11(1),
22-34.
Ratnanigrum, R. (2016). The influence of profitability and income tax on income smoothing rankings.
Jurnal Bisnis & Manajemen, 17(2), 133-143.
Ronen, J., Tzur, J., & Yaari, V. L. (2006). The effect of directors’ equity incentives on earnings management.
Journal of Accounting and Public Policy, 25(4), 359-389.
Roychowdhury, S. (2006). Earnings management through real activities manipulation. Journal of Accounting
and Economics, 42(3), 335-370.
Schipper, K. (1989). Commentary on earnings management. Accounting Horizons, 3(4), 91-102.
Scott, W.R. (2009). (Fifth ed.). Financial accounting theory. Prentice Hall, New Jersey: Upper Saddle
River.
Tapia, A.B., & Taskón Fernández, M. (2011). Accruals, cash flows and earnings in European privately held
firms. Pecvnia Monográfico, 133-156.
Watts, R., & Zimmerman, J. (1986). Positive accounting theory, Englewood Cliffs, New Jersey: Prentice
Hall.
Watts, R.L. & Zimmerman, J.L. (1990). Positive accounting theory: A ten year perspective. Accounting
Review, 65(1), 131-156.
Wijesinghe, R., & Kehelwalatenna, S. (2017). The impact of earnings quality on the stock returns of listed
manufacturing companies in the Colombo Stock Exchange. Colombo Business Journal International
Journal of Theory and Practice, 8(2), 69-89.
Wruck, K. H. (1990). Financial distress, reorganization, and organizational efficiency. Journal of Financial
Economics, 27(2), 419-444.
| tmt.2020.333.pdf |
Association of Economists and Managers of the Balkans
- UdEkoM Balkan -
179 Ustanicka St, 11000 Belgrade, Republic of Serbia
E-mail: [email protected]
www.udekom.org.rs
- UdEkoM Balkan -
179 Ustanicka St, 11000 Belgrade, Republic of Serbia
E-mail: [email protected]
www.udekom.org.rs
Tel. +381 62 812 5779
VAT number: 108747027
Registration number.: 28157347
Registration number.: 28157347