Investor sentiment and earnings management in Brazil
ABSTRACT This research analyzes whether there is a temporal association between investor sentiment and earnings management in Brazil. Several studies have investigated the determinants of earnings management, such as factors inside or external to companies and regulatory requirements, but few have c...
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| Published in: | Revista Contabilidade & Finanças Vol. 31; no. 83; pp. 283 - 301 |
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| Main Authors: | , , , |
| Format: | Journal Article |
| Language: | English |
| Published: |
São Paulo
Departamento de Contabilidade - FEA/USP
01-05-2020
Universidade de São Paulo, FEA, Departmento de Contabilidade e Atuária Universidade de São Paulo |
| Subjects: | |
| Online Access: | Get full text |
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| Summary: | ABSTRACT This research analyzes whether there is a temporal association between investor sentiment and earnings management in Brazil. Several studies have investigated the determinants of earnings management, such as factors inside or external to companies and regulatory requirements, but few have considered personal factors, such as investor sentiment in Brazil. With this investigation, it was apparent from the findings that accruals quality is affected by investor sentiment. For participants in the Brazilian capital market, this research reinforces the need for a more careful analysis of the results reported by companies, since managers, in response to investor sentiment, may manage earnings to inflate accounting profit through accruals and influence the market’s ability to price shares correctly. It is evident that accounting choices are much more than just financial decisions and are subject to investor sentiments. The effect of investor sentiment should be considered among the determinants of future earnings management. A sample of non-financial Brazilian companies that traded shares on the Brasil, Bolsa, Balcão (B3) exchange from 2010 to 2016 was used. The investor sentiment index was calculated according to the methodology of Baker and Wurgler (2007). For earnings management, the models of Kang and Sivaramakrishnan (1995), Kothari, Leone, and Wasley (2005), and Dechow, Hutton, Kim, and Sloan (2012) were used. The estimates were carried out through regressions for pooled panel data, fixed, and dynamic effects using the system generalized method of moments (GMM) estimator. Discretionary accruals are positively associated with investor sentiment in the Brazilian capital market, in a similar way to markets with greater informational efficiency and notwithstanding the code-law system. Analyzing low and high sentiment periods separately, the findings suggest that managers increase accruals after high sentiment and reduce them after low sentiment.
RESUMO A pesquisa analisa se existe associação temporal entre o sentimento do investidor e o gerenciamento de resultados no Brasil. Vários estudos investigaram os determinantes do gerenciamento de resultados, fatores externos ou internos das empresas e normativos, mas poucos consideraram fatores pessoais, tal como o sentimento dos investidores no Brasil. Com esta investigação, restou patente, pelos achados, que a qualidade dos accruals é afetada pelo sentimento do investidor. Para os participantes do mercado de capitais brasileiro, esta pesquisa reforça a necessidade da análise mais criteriosa dos resultados reportados pelas empresas, uma vez que os gestores, em resposta ao sentimento do investidor, podem gerenciar resultados para inflar o lucro contábil mediante accruals e influenciar a capacidade de o mercado precificar corretamente as ações. Evidencia-se que, muito mais do que decisões financeiras, as escolhas contábeis estão sujeitas aos sentimentos dos investidores. Deve-se considerar o efeito do sentimento dos investidores entre os determinantes de um futuro gerenciamento de resultados. Utilizou-se amostra composta por empresas brasileiras não financeiras que negociaram ações na Brasil, Bolsa e Balcão (B3) de 2010 a 2016. O índice de sentimento do investidor foi apurado conforme a metodologia de Baker e Wurgler (2007). Para gerenciamento de resultados, utilizaram-se os modelos de Kang e Sivaramakrishnan (1995), Kothari, Leone e Wasley (2005) e Dechow, Hutton, Kim e Sloan (2012). As estimativas foram feitas por meio de regressões para dados em painel pooled, efeito fixo e dinâmico com o GMM system estimator (generalized method of moments). Os accruals discricionários estão positivamente associados com o sentimento do investidor no mercado de capitais brasileiro, semelhante a mercados com maior eficiência informacional e inobstante o sistema code-law. Analisando separadamente os períodos de baixo e alto sentimento, os achados sugerem que os gestores aumentam os accruals após alto sentimento e os reduzem depois de baixo sentimento. |
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| ISSN: | 1519-7077 1808-057X |
| DOI: | 10.1590/1808-057x201909130 |