ACCOUNTING COVENANTS AND RESULTS MANAGEMENT: EVIDENCE FROM CVM NORMATIVE INSTRUCTION No. 527/12
Name: MARIANA BORGES LOPES
Publication date: 18/12/2020
Advisor:
Name |
Role |
|---|---|
| JOSE ELIAS FERES DE ALMEIDA | Advisor * |
Examining board:
| Name |
Role |
|---|---|
| JOSE ELIAS FERES DE ALMEIDA | Advisor * |
| RODRIGO SIMONASSI SCALZER | Internal Examiner * |
Summary: This study uses CVM Normative Instruction (IN nº527/12), which deals with the voluntary disclosure of EBITDA, as an exogenous shock to the environment of debt contracts to investigate the effect of normative change on earnings management practices via discretionary accruals and real activities, in response to the impact of changes in the attributes of accounting covenants. In order to achieve the proposed objectives, a research design with a quasi-experiment approach, using differences-in-differences (DID) models, in 209 non-financial public companies with registration, will be employed as econometric modeling. at the Comissão de Valores Mobiliários (CVM) from 2010 to 2015. To define the control group, required by this research design, the Propensity Score Matching (PSM) technique was used, which generated a sample with 517 matched pairs, totaling 1,034 observations. The data related to the covenants were collected from the reference forms published by the companies on the [B³] website, while the accounting data were extracted from the Comdinheiro database. Subsequently, the level of earnings management was estimated through five earnings management detection models, two of which are discretionary accruals (Dechow, Sloan & Sweeney, 1995), and three via real activities (Roychowdhury, 2006). The analysis of the results that test the first hypothesis showed that there is a positive association between the EBITDA disclosed by companies that have covenants based on this indicator and the degree of earnings management, measured by the metrics of discretionary accruals (EM1 and EM2) and real activities (EM3 and EM4). The analysis of univariate tests and the differences-in-differences models allows us to refute the hypothesis that the entry into force of ICVM Nº 527/12 positively impacted the level of earnings management for companies submitted to covenants based on EBITDA.
