Article2012

Accruals and ‘accounting numbers management’ in UK executive agencies

Vicente José Pina Martínez · María José Arcas · Caridad Martí

31 citations0/0 files storedPublic Money & Management

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Auditing, Earnings Management, Governance Public Policy and Administration Research Accounting and Organizational Management

Abstract

Public sector reforms have implemented business techniques, including management by results, cost management and accrual accounting, to make public entities more efficient and accountable. As a consequence, ‘accounting numbers management’ has become a way for managers in the public sector to adapt accounting figures to their interests. This study focuses on ‘earnings management’ (manipulation of earnings) in government agencies. The authors provide evidence of earnings management in which agencies try to keep net operating costs to around zero. The authors' findings question the effectiveness of financial targets associated with accrual-based measures.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1991Earnings Management During Import Relief Investigations 1985Positive Accounting Theory 1999A Review of the Earnings Management Literature and Its Implications for Standard Setting 1997Earnings management to avoid earnings decreases and losses 2012Detecting Earnings Management 1994Debt covenant violation and manipulation of accruals 1999Earnings Management to Exceed Thresholds

Cited by

2022Negative effects of the adoption of accrual accounting in the public sector: a systematic literature review and future prospects 2019Is political competition a driver of financial performance adjustments? An examination of Swedish municipalities 2020Heads and Tails of Earnings Management: Quantitative Analysis in Emerging Countries 2020Political competition as a motivation for earnings management close to zero: the case of Portuguese municipalities

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