Using Beneish Model in Detecting of Earnings Management Practices: Empirical Analysis from Palestinian Listed Companies رسالة ماجستير

Abstract

This study aimed to detect the eaming management practices of Palestinian listed firms on the PEX using Beneish Model. Also, the study examined the effect of Beneish indicators on accruals earnings management. Moreover, it investigated the role of firm size as a moderator of the relationship between Beneish Model indicators and earnings management. The data analysis method is panel data regression analysis with E-Views Software over a six-year period (2016-2021). The study population includes all Palestinian industrial and services companies and the sample consists of 8 industrial and

5 services companies giving a total of 78 observations for each variable.

The results demonstrated that Beneish model is non-effective in detecting earnings management. Day’s sales in receivables index, assets quality index and sales, general and administrative expense index have a positive non-significant effect on eamings management, while profitability has a negative non-significant effect on earnings management. On the other hand, growth index, depreciation index, accruals and leverage have a positive significant effect on earnings management. Also, it is shown that firm size didn’t have a moderating effect on the relationship between Beneish model indicators and eamings management. Additionally, this study revealed that only SGI,

DEPI, TATA, and LVGI are significant in detecting eamnings management.

Accordingly, this study recommends that the Palestine Capital Market Authority (PCMA), during its evaluation and monitoring of the companies, examine those determined financial ratios in order to ensure that financial reports accurately reflect the company's current situation and it’s free from earmings management. Moreover, Firms’

managers are recommended to control the debt level to reduce accrual earnings management and avoid making discretionary accounting choices in order to manipulate eamings. The study also recommends for future researches on Palestinian companies about earnings management practices using other models such as, the CFEBT model and the Q-DMFC models.