Earnings management by non-profit organisations: evidence from UK charities

Nguyen, Tam and Soobaroyen, Teerooven (2018) Earnings management by non-profit organisations: evidence from UK charities. Australian Accounting Review . ISSN 1835-2561

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Abstract

Informed by stakeholder theory and resource dependence theory, this paper investigates whether United Kingdom (UK) charities are engaged in earnings management practices. Based on a sample of 1414 charities over a five-year period (2008–2012) this study firstly finds that UK charities use discretionary accruals to drive their financial results toward a zero surplus/deficit; this result also reveals that the distribution of reported earnings around zero is prevalent amongst UK charities. In addition, in contrast to prior findings, the empirical results point to a significant association between leverage and earnings management behaviour by charities. Lastly, this study also finds that the practice of earnings management is influenced by non-profit organizational size.

Item Type: Article
Additional Information: This is the peer reviewed version of the following article, which has been published in final form at https://onlinelibrary.wiley.com/doi/abs/10.1111/auar.12242. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Keywords: earnings management; non-profit organisations; charities; leverage; stakeholder theory; resource dependence theory
Schools/Departments: University of Nottingham, UK > Faculty of Social Sciences > Nottingham University Business School
Identification Number: https://doi.org/10.1111/auar.12242
Depositing User: Eprints, Support
Date Deposited: 07 Mar 2018 14:52
Last Modified: 13 Jul 2018 08:15
URI: http://eprints.nottingham.ac.uk/id/eprint/50295

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