Earnings management, intangible assets and family control: an analysis of the quality of brazilian accounting information

Abstract

The quality of accounting information is key for investors, shareholders, regulators, clients, and
competitors, as it promotes efficiency in decision making. Studies have concluded that the proportion
of intangible assets is one of the factors influencing the quality of accounting information.
This study sought to analyze the relationship between the representativeness of intangible assets
and earnings management (EM) in Brazilian companies in the period from 2011 to 2017. In addition, we investigated the influence of family control on EM. To measure EM, we used the model
of Kang and Sivaramakrishnan (1995), and to calculate the representativeness of intangible
assets, we analyzed the relationship between intangible assets and total assets. Regarding the
method, this study applied linear regression with panel data. The hypotheses investigated were:
(1) Businesses with higher investment in intangible assets will present lower earnings management
(and, consequently, higher quality of accounting information); (2) Family businesses will
present greater earnings management (and lower quality of accounting information). The finding
indicated a negative relationship between EM and intangible assets, confirming hypothesis 1.
However, the relationship between family control and EM was not significant, that is, we could not
confirm hypothesis 2. Our findings confirm that the proportion of intangible assets is one of the
factors influencing the quality of accounting information. Studies on this topic have been growing
in visibility and attracting the interest of researchers and entrepreneurs from several sectors, and
even non-profit organizations.