Discretionary Accruals, Liquidity and Corporate Governance Index in Brazil

Corporate Ownership & Control, Vol. 5, May 2008

Posted: 7 Dec 2007

See all articles by Ricardo Lopes Cardoso

Ricardo Lopes Cardoso

Brazilian School of Public and Business Administration; Rio de Janeiro State Univ., FAF

Andre C. B. Aquino

University of Sao Paulo - FEARP-USP

Jose Elias Feres de Almeida

Federal University of Espirito Santo (UFES)

Antonio J. B. das Neves

Fucape Business School

Abstract

This study investigates if the level of discretionary accruals (DAs) is different for companies whose corporate governance level is certified by Bovespa compared to those ones that are not. And also for companies whose stocks negotiated at Bovespa have high liquidity compared to the ones with low liquidity. The main purpose is to comprehend the phenomenon of accounting choices (measured as DAs), its incentives and counter-incentives. In this context, the issues were: i) Is there any difference of DAs intensity between certified and non-certified companies, considering the corporate governance level?; ii) Is there any difference of DAs intensity with high liquidity stocks at Bovespa and those ones with low liquidity? This research took into consideration Jones' original model (1991), a sample with 1,791 observations collected from 1997 to 2004. Empirical results from our study show that there is no significant statistic difference in the level of DAs between the firms listed or not in the corporate governance index. This suggests the need to consider incentives and counter-incentives from the capital market to those different set of firms, in relation with accounting choices.

Keywords: Discretionary accruals, Earnings Management, Liquidity, Corporate Governance, Capital Market

JEL Classification: M41, M43, M47, G34, G38

Suggested Citation

Cardoso, Ricardo Lopes and Aquino, Andre C. B. and Almeida, Jose Elias Feres de and das Neves, Antonio J.B., Discretionary Accruals, Liquidity and Corporate Governance Index in Brazil. Available at SSRN: https://ssrn.com/abstract=1021081

Ricardo Lopes Cardoso (Contact Author)

Brazilian School of Public and Business Administration ( email )

Rua Jornalista Orlando Dantas, 30
Office 206. Botafogo
Rio de Janeiro, Rio de Janeiro 22231-010
Brazil
+55-21 30832713 (Phone)

Rio de Janeiro State Univ., FAF ( email )

Rua Sao Francisco Xavier, 524
bloco B, sala 1024
Rio de Janeiro, Rio de Janeiro
Brazil

Andre C. B. Aquino

University of Sao Paulo - FEARP-USP ( email )

Av. Bandeirantes, 3900 - Monte Alegre
Ribeião Preto, 14040-900
Brazil
55 16 3602-4972 (Phone)

HOME PAGE: http://www.fearp.usp.br

Jose Elias Feres de Almeida

Federal University of Espirito Santo (UFES) ( email )

Av. Fernando Ferrari, n. 514, Goiabeiras
Centro de Ciências Jurídicas e Econômicas
Vitoria, Espírito Santo 29075-910
Brazil
+5527992248737 (Phone)

Antonio J.B. Das Neves

Fucape Business School ( email )

Rua Fernando Ferrari, 1358
Goiabeiras
Vitória, Espirtio Santo 29075-010
Brazil
55 27 40094444 (Phone)
55 27 40094422 (Fax)

HOME PAGE: http://www.fucape.br

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