Accounting Ratio-Based Predictions: An Analysis of the Relationship between Indicators of Financial Health and Those of Accounting Manipulation

European Accounting and Management Review, Vol. 3, No. 2

16 Pages Posted: 6 Dec 2017

See all articles by Joan Llobet-Dalmases

Joan Llobet-Dalmases

Open University of Catalunya (UOC) (Open University of Catalonia)

Dolors Plana

Open University of Catalunya (UOC) (Open University of Catalonia)

M Angels Fito

Independent

Date Written: May 1, 2017

Abstract

Against a backdrop of global accounting harmonization, financial information is required to be useful and trustworthy for investors and other users. This study contributes to establishing whether there is a relationship between the Z-score model for predicting financial distress and the Z Vladu model for predicting earnings manipulation. Both models discriminate between companies using financial statement ratios.

Extracting data from the Sistema de Análisis de Balances Ibéricos (Iberian Accounts Analysis System, or SABI) database for medium-sized and large Spanish companies for the period 2005 to 2015, both summary indicators have been calculated and descriptive and bivariate analyses have been performed.

The results show that there is a relationship between both indicators, albeit a weak one.

Keywords: financial distress, Z-score, earnings manipulation, earnings management, earnings quality, Spanish firms

JEL Classification: M00

Suggested Citation

Llobet-Dalmases, Joan and Plana, Dolors and Fito, M Angels, Accounting Ratio-Based Predictions: An Analysis of the Relationship between Indicators of Financial Health and Those of Accounting Manipulation (May 1, 2017). European Accounting and Management Review, Vol. 3, No. 2. Available at SSRN: https://ssrn.com/abstract=3080873 or http://dx.doi.org/10.2139/ssrn.3080873

Joan Llobet-Dalmases (Contact Author)

Open University of Catalunya (UOC) (Open University of Catalonia) ( email )

Tibidabo Av. 39-43
08035 Barcelona, Barcelona 08035
Spain

Dolors Plana

Open University of Catalunya (UOC) (Open University of Catalonia) ( email )

Tibidabo Av. 39-43
08035 Barcelona, Barcelona 08035
Spain

M Angels Fito

Independent ( email )

No Address Available
United States

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