Earnings thresholds among the listed Brazilian enterprises: A strategy to avoid earnings loss or earnings decreased


Earnings thresholds
Avoiding earnings below zero
Avoiding earnings decreases
Manipulating property disposition

How to Cite

Liu, Z. (2023). Earnings thresholds among the listed Brazilian enterprises: A strategy to avoid earnings loss or earnings decreased. Review of Business Management, 25(4). https://doi.org/10.7819/rbgn.v25i4.4244


Purpose – Few studies have analyzed how enterprise managers manipulate business
activities to meet the earnings thresholds of Brazilian listed companies. This study
investigates whether Brazilian listed companies manipulate their business activities
to meet their earnings thresholds.
Theoretical framework – This study verifies whether Brazilian listed companies
manipulate their business activities to meet their earnings thresholds and whether
this behavior is consistent with the signaling theory.
Design/methodology/approach – We employ the Deng model (2018) and
analyze how firms manipulate their earnings using gains or losses from property
disposition and whether they attempt to meet their earnings thresholds by avoiding
earnings losses and decreases. A regression model is then used to verify whether the
manipulation affects performance in the following period (i.e., sends signals). A total
of 314 samples from 49 Brazilian listed companies during 2011-2018 are examined.
Findings – Most Brazilian listed companies do not manipulate their gains or
losses from property disposition to avoid earnings losses or decreases, and the
manipulation does not affect performance in the following period. Therefore,
the signals do not reflect future expectations, thus rejecting the signaling theory.
Practical & social implications of research – Enterprise managers could carefully
control operating activities. Creditors could monitor business transactions.
Accountants should pay attention to monitoring their real earnings, seeking to
align the exercise of manager judgment with practices that improve the quality
of accounting information. The board of directors could strengthen its control
over the property disposition behavior of enterprise managers.
Originality/value – This study is the first to verify the earnings manipulation behavior
of Brazilian firms by using the signaling theory. We also analyze the manipulation
of the gains or losses from property disposition to address the gap in the literature.
Keywords: Earnings thresholds, Brazil, avoiding earnings below zero, avoiding
earnings decreases, manipulating property disposition.



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