Corporate fraud and earnings management: a study in brazilian bank institutions

DOI: https://doi.org/10.4025/enfoque.v40i2.51591
Keywords: Corporate fraud. Earnings management. Financial institutions.

Abstract

Accounting is an instrument used to reduce the information asymmetry, but in some situations, managers may use discretionary power in accounting method choices. This study aimed at verifying the relationship between the occurrence of corporate fraud and the earnings management in financial institutions. For this, it was first analyzed whether banking institutions practice results management. Thus, the discretionary portion of the PCLD was used as proxy of the management,
its achievement occurred in two ways, calculation according to CMN Resolution 2682/99
and the obtaining of regressors. After these values were used in regressions with adjusted net
income to identify the management presence in the banks analyzed. Binomial Logistic Regression
was used in order to assess the probability of earnings management fraud to occur. All
Brazilian financial institutions active in at least 20 quarters during the period from 2008 to 2017
were selected as a sample, which corresponds to 106 institutions. Thus, it was possible to observe
that the Brazilian financial institutions make use of the discretionary portion of LLP, aimed
at earnings management. No significant relationship was identified between the occurrence of
corporate fraud and the discretionary portion of LLP. This research contributes to other studies
related to corporate fraud and earnings management in Brazilian public and private financial
institutions, by showing a model to analyze the relationship of the Manager’s discretion with the
probability of fraud occurrence.

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Author Biographies

Maurício Soares de Faria Junior, Universidade Federal de Goiás

Mestre em Ciências Contábeis - UFG
Universidade Federal de Goiás – UFG
Programa de Pós-Graduação em Ciências Contábeis – PPGCONT - UFG

Michele Rílany Rodrigues Machado, Programa de Pós-Graduação em Ciências Contábeis (PPGCC - UFG) - Professora

Doutora em Administração – UNB
Professora Adjunta da Universidade Federal de Goiás – UFG
Programa de Pós-Graduação em Ciências Contábeis – PPGCONT - UFG

José Alves Dantas, Programa de Pós-Graduação em Ciências Contábeis (PPGCont - UNB) – Professor

Doutor em Ciências Contábeis - UNB
Professor Adjunto da Universidade de Brasília - UNB
Programa de Pós-Graduação em Ciências Contábeis – PPGCONT - UNB

Published
2021-03-10
How to Cite
Faria Junior, M. S. de, Machado, M. R. R., & Dantas, J. A. (2021). Corporate fraud and earnings management: a study in brazilian bank institutions. Enfoque: Reflexão Contábil, 40(2), 115-134. https://doi.org/10.4025/enfoque.v40i2.51591
Issue
Vol 40 No 2 (2021): Enf.: Ref. Cont.
Section
Original Articles

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