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Earnings Management by Non-Profit Organisations: Evidence from UK Charities

Nguyen, Tam and Soobaroyen, Teerooven (2019) 'Earnings Management by Non-Profit Organisations: Evidence from UK Charities.' Australian Accounting Review, 29 (1). 124 - 142. ISSN 1035-6908

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Informed by stakeholder theory and resource dependence theory, this paper investigates whether United Kingdom (UK) charities are engaged in earnings management practices. Based on a sample of 1414 charities over a five-year period (2008–2012) this study firstly finds that UK charities use discretionary accruals to drive their financial results toward a zero surplus/deficit; this result also reveals that the distribution of reported earnings around zero is prevalent amongst UK charities. In addition, in contrast to prior findings, the empirical results point to a significant association between leverage and earnings management behaviour by charities. Lastly, this study also finds that the practice of earnings management is influenced by non-profit organizational size.

Item Type: Article
Uncontrolled Keywords: Earnings management, non-profit organisations, charities, stakeholder theory, resource dependence theory
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Accounting Centre
Depositing User: Elements
Date Deposited: 14 Sep 2018 15:57
Last Modified: 01 Apr 2019 09:15

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