Motives and techniques of earnings management used in a global environment

Research background: From a research perspective, it is very important to point out motives and used techniques of earnings management because it allows better identify the factors that drive the decision to practice earnings management. Motives of earnings management can be organized thematically into contractual obligations, asset pricing, or influencing external parties which are carried out through the use of various earnings management techniques. Purpose of the article: The article aims to identify all possible motives leading to the practice of earnings management in companies in a global environment and to point out the individual techniques of earnings management, which are used to realize the individual motives. Methods: The method of description and the method of classification of technical terms are used to specify in more detail the motives and techniques of earnings management used in the global environment. Findings & Value added: In a global environment exist strong motives for managers to practice earnings management. These motives include better pricing of securities, beating analysts’ expectations, avoid negative earnings, show better performance than past, better compensation of managers, tax evasion, external finance attraction, concealment of poor performance, favorable contracts from suppliers, customers, lenders, and employees and avoiding technical default on debts covenants. Another dimension of earnings management is the stress level of managers builds up due to expectations of better performance by stakeholders. In a global environment, there are several techniques used to practice motives leading to earnings management. These techniques are described in more detail in the article.