We test the earnings management behavior of Russian companies in the years 2001 and 2002. We analyze the effects of ownership structure on the extent of tax management. We first hypothesize that Russian firms manage earnings downward to reduce income taxes. We test for irregularities in the distribution of earnings in the subsamples of the companies with relatively high and low marginal tax rates in 2001 and 2002, distinguishing between low incentives versus high incentives for tax management. Conducting univariate and multivariate tests, we find evidence consistent with our hypothesis. We secondly hypothesize that incentives to provide high quality financial information constrain tax management. Consistently we find that public companies manage taxes to a lesser extent than private companies. We thirdly test whether the interaction among market forces, political forces, and the changing tax law from 2001 to 2002 caused a change in the reporting practices. We find evidence consistent with public firms reporting earnings of a higher quality in 2002.
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Spring 2006
Research Article|
January 01 2006
Earnings Management when Incentives Compete: The Role of Tax Accounting in Russia
Igor Goncharov, Assistant Professor;
Igor Goncharov, Assistant Professor
University of Amsterdam
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Jochen Zimmermann, Professor
Jochen Zimmermann, Professor
University of Bremen
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Online ISSN: 1558-8025
Print ISSN: 1542-6297
American Accounting Association
2006
Journal of International Accounting Research (2006) 5 (1): 41–65.
Citation
Igor Goncharov, Jochen Zimmermann; Earnings Management when Incentives Compete: The Role of Tax Accounting in Russia. Journal of International Accounting Research 1 January 2006; 5 (1): 41–65. https://doi.org/10.2308/jiar.2006.5.1.41
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