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  • Droughts and big baths of Australian agricultural firms

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    52338_1.pdf (120.4Kb)
    Author(s)
    Kent, P
    Monem, R
    Cuffe, G
    Griffith University Author(s)
    Monem, Reza
    Year published
    2008
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    Abstract
    Purpose This paper examines whether Australian agricultural firms display big bath behaviour during droughts by recognising extraordinary and abnormal losses. It is hypothesised that Australian agricultural firms are more likely to report big bath losses in drought years than in non-drought years, and in a given drought year, agricultural firms are more likely to report big bath losses than firms in other industries. Design/methodology We analyse 405 firm-years data for agricultural firms over 1980-1995. For comparison, we also analyse matched-pair samples of 17 and 30 non-agricultural firms for the drought years of ...
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    Purpose This paper examines whether Australian agricultural firms display big bath behaviour during droughts by recognising extraordinary and abnormal losses. It is hypothesised that Australian agricultural firms are more likely to report big bath losses in drought years than in non-drought years, and in a given drought year, agricultural firms are more likely to report big bath losses than firms in other industries. Design/methodology We analyse 405 firm-years data for agricultural firms over 1980-1995. For comparison, we also analyse matched-pair samples of 17 and 30 non-agricultural firms for the drought years of 1983 and 1995, and matched-pair samples of 19 non-agricultural firms for the non-drought years of 1986 and 1990, respectively. Both univariate and multivariate analyses are used to test the hypotheses. Findings It is found that agricultural firms are more likely to take big baths in drought years than in non-drought years. Further, in a given drought year, agricultural firms are more likely to take big baths than non-agricultural firms. Further analyses of sales, profitability, and extraordinary and abnormal items support the idea that big baths reflect managerial opportunism rather than the economic consequences of droughts. Originality Previous studies have not investigated the impact of natural calamities like flood and drought on accounting choices. This paper makes an original contribution to the accounting literature by documenting evidence on the extent to which an act of nature, over which management has little or no control, can influence accounting choices.
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    Journal Title
    Pacific Accounting Review
    Volume
    20
    Issue
    3
    Publisher URI
    https://www.emerald.com/insight/
    DOI
    https://doi.org/10.1108/01140580810920218
    Copyright Statement
    © 2008 Emerald. This is the author-manuscript version of this paper. Reproduced in accordance with the copyright policy of the publisher. Please refer to the journal's website for access to the definitive, published version.
    Subject
    Financial accounting
    Publication URI
    http://hdl.handle.net/10072/22168
    Collection
    • Journal articles

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