CASH MANAGEMENT BY ACCUMULATION CONVERSION AND THE CAMOUFLAGE OF EARNINGS MANAGEMENT
DOI:
https://doi.org/10.22561/cvr.v35i1.7043Keywords:
Camouflage, Cash management, Earnings management, AccrualsAbstract
The study aims to evaluate the relationship between cash management by conversion of accruals (CMCA) and earnings management practices based on accounting choices in Brazilian companies. Studies on this relationship are still incipient in the field of accounting information quality and in the literature on earnings management (EM) practices, especially in the Brazilian context, where such relationships have not yet been investigated. The sample refers to 161 non-financial companies listed in [B]3 in the period 2011 to 2018. The data correspond to quarterly information collected in the Refinitiv Eikon database and analyzed using multiple linear regression. Evidence indicates a negative relationship between the CMCA and the EM, especially in the context of negative discretionary accruals, indicating that the involvement of Brazilian companies in receivables factoring activities or discounting trade bills can represent a tool to camouflage the EM, and not only operations to meet financial needs. These findings indicate that the CMCA can add noise to the relationship between operating cash flow and sales, limiting the explanatory power of accrual estimation models, in addition to the possibility of companies camouflaging their EM practices. Light is shed on the possibility that financial management activities may be being used to indicate lower levels of EM, not necessarily by reducing discretion, but by attempts to camouflage the discretion used in accounting numbers, which can affect decisions of investors and analysts.
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