Opportunistic management behavior in reporting earnings of agricultural companies

Abstract

© 2018, Universidade Federal Rural de Pernambuco. All rights reserved. This study examines reliability of reported earnings of agricultural companies in the Republic of Serbian. Methodologically, the study utilizes the various regression models and univariate tests. Using sample of 1,983 firm-year observations from the period 2009 to 2013, we find that agricultural companies in the Republic of Serbia are engaged in earnings management. Further, we find that profitability and leverage have a significant influence on scope and direction of earnings management. Income-decreasing behavior is observed in more profitable firms, while income-increasing behavior is observed in highly leveraged and more profitable firms. The results might have significant implications for agricultural regulators, users of financial statements and researchers who study the problem of earnings management within international accounting setting and weak legal enforcement.