Master's – An examination over discretionary accruals due to the recognition of impairment losses
Advisor: Prof. Dr. Fernando Dal-Ri Murcia
Comission: Profs. Drs. Luiz Nelson de Carvalho, Flávia Zóboli Dalmácio and Alexandre Gonzalez
Link Youtube: https://youtu.be/--iZYUa4pzw
This study aims to examine the predictive power of certain discretionary accruals when observing the recognition of impairment losses on long-lived assets. The work introduce new proxies originating from discretionary accruals of companies that can influence the realization of long-lived assets, such as the estimated credit losses, inventories losses like obsolescence or slow moving and liabilities such as contingencies, guarantees and restructuring charges. The field of study of impairment is currently explored by studies dedicated to understand market reactions, determinants and characteristics for recognition, and most of them found an opportunistic behavior of managers. These findings indicate the use of earnings management and its relevance associated with incentives between principal and agent. Therefore, we carried out a research on the literature on earnings management and incentives to find proxies that were used in previous studies to consider as control variables. The research was developed with archival data collected from Thomson Reuters and financial statements footnotes from Brazilian listed companies in the Brazilian Securities and Exchange Commission (CVM) for the period between 2008 and 2018, forming a total database of 253 companies, comprising 2,588 firm-observations to examine the amounts and annual variations of the selected discretionary accruals, in order to find out their association with the recognition of impairment losses. From the model developed for logistic regression with the impairment presented as the dummy variable, the coefficients for current accruals and lagged within two years were estimated, in addition to control variables already used in the literature such as ROA, ROE, firm size, sector and year. In a second model, an economic variable was incorporated together with the controls mentioned and the original variables of interest. The main results obtained confirmed the significance of inventory losses, provision for contingencies and ECL for the current period within the recognition of impairment losses. A single significance between the economic variable GDP and the dependent variable were found, notwithstanding a shattering relation with the dependent variable in the presence of the other interest variables and their control variables. Finally, this study proposes to expand the literature over Brazilian publicly-listed companies, going beyond the recurring researches carried out in other countries, in order to explore an empirical analysis through a strand of certain accruals with discretionary characteristics, contributing to the current debate on the recognition of impairment losses.
*Abstract provided by the author