Volume 20, Number 1, June 2025
| Establishing an Evaluation Model for Determining Key Criteria in Earnings Management: Application of AHP Model |
Abstract
This study addresses a gap in earnings management research by employing a decision-science approach to evaluate critical criteria from an accountant's perspective. Utilizing a combination of the modified Delphi technique and the Analytical Hierarchy Process (AHP), we develop a framework for assessing and ranking key factors influencing earnings management practices. Our empirical results reveal that the internal environment of enterprises is substantially more influential than the external environment in earnings management decision-making. Among the sub-criteria, financial distress, company size, and legal environment emerge as the most critical factors. These findings highlight the importance of internal governance, the impact of financial strain on earnings management propensity, and the need for tailored regulatory approaches based on company size. The study contributes to the literature by providing a structured, quantitative approach to evaluating earnings management factors and offers accounting professionals a valuable hierarchical assessment tool. This research enhances our understanding of earnings management drivers and has significant implications for practitioners, regulators, and future research in accounting and finance.
Keywords: Earnings Management; Modified Delphi Method; Analytical Hierarchy Process (AHP); Decision Science; Accounting
JEL Classification: C44, M2