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Research Article Open access CC BY 4.0

An Effective Enterprise Earnings Management Detection Model for Capital Market Development

Suduan Chen, Zong-De Shen

Journal of Economics, Management and Trade · pp. 77–91 · Published 10 Jul 2020

10.9734/jemt/2020/v26i430250

Abstract

This study focuses on accrual-based earnings management. The purpose of this study is to establish an innovative and high-accuracy model for detecting earnings management using hybrid machine learning methods integrating stepwise regression, elastic net, logistic regression (Logit regression), and decision tree C5.0. Samples of this study are the electronic companies listed on the Taiwan Stock Exchange, and data are derived from the Taiwan Economic Journal (TEJ) for a period of ten years from 2008 to 2017. Results show that the earnings management detection model, as established by elastic net and C5.0, provides the best classification performance, and its average accuracy reaches 97.32%.

Earnings management machine learning elastic net C5.0.

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