Parallels and Differences in Earnings Management of the Visegrad Four and the Baltics
Pavol Durana, Romualdas Ginevicius, Mariusz Urbanski, Ivana Podhorska, Milos Tumpach
Keywords:
business finance, competitiveness, earnings management, time series analysis, Visegrad Four, Baltics
Abstract:
Earnings management is a legal and widely preferred phenomenon of business finance that
financial managers use to maintain and improve the enterprise’s competitiveness. Managers
purposely manipulate business earnings to achieve the required status of the enterprise. The
consequence of these activities is to provide a positive perspective for the owners, encourage
the profitability for the creditor and the investors as well as demonstrate economic strengths
to competitors. This article aims to identify parallels and differences in earnings management
of enterprises in the Visegrad Four and the Baltics in terms of competitiveness for the nineyear
period 2010-2018. The research uses a final sample of 4,543 observations from the EBITs
of Slovak, Czech, Hungarian and Polish enterprises as well as 1,633 observations from the
EBITs of Latvian, Lithuanian and Estonian enterprises. Time-series methods with all necessary
assumptions have been run for the analyzed financial dataset. The results of the econometric
modeling of unit roots show significant parallels in these groups of countries. The enterprises
from the Visegrad group and the Baltics group use the apparatus of earnings management to
be competitive. The obtained results confirm the systematic but legal manipulation from the
side of management. A quantitative analysis of homogeneity tests using 1,000,000 Monte Carlo
simulations indicates significant time differences of manipulation in these emerging countries.
The year 2014 signaled a radical “accelerando” in earnings management for the V4, and the year
2016 is highlighted for the Baltics.
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 Parallels and Differences in Earnings Management of the Visegrad Four and the Baltics [PDF file] [Filesize: 1.24 MB]
 10.7441/joc.2021.03.03
Durana, P., Ginevicius, R., Urbanski, M., Podhorska, I., & Tumpach, M. (2021). Parallels and Differences
in Earnings Management of the Visegrad Four and the Baltics. Journal of Competitiveness, 13(3), 39–55. https://doi.org/10.7441/joc.2021.03.03
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