Earnings management by health insurance companies in Brazil

• Antonio Lopo Martínez ^[1] ; Flávio Alves de Carvalho ^[2]
  1. [1] Universidade de Coimbra

     Universidade de Coimbra

     Coimbra (Sé Nova), Portugal

     
  2. [2] Fucape Business School

     Fucape Business School

     Brasil

     
• Localización: European journal of management and business economics, ISSN-e 2444-8494, ISSN 2444-8451, Vol. 31, Nº. 4, 2022, págs. 453-468
• Idioma: inglés
• Enlaces
  • Texto completo
• Resumen

  • Purpose – This study examines whether Brazilian health insurance companies (HICs) engage in earnings management through discretionary accruals or operational decisions by refraining from reporting a low indicator of sustainability in the market (IDSM).

    Design/methodology/approach – The study used the Jones and Modified Jones models to identify earnings management through discretionary accruals and used the model described by Roychowdhury to estimate the abnormal behaviors of operational decisions. Data covering 2012 to 2018 were collected from the ANS website.

    Findings – The results show that HICs engaged in earnings management to avoid reporting a low IDSM. The findings should help health insurance clients make decisions regarding the purchase or change of health insurance. The findings should also encourage regulators to improve their evaluation of the economic and financial risks around HICs.

    Originality/value – The National Agency of Supplementary Health (ANS) established a qualification program for HICs, monitoring them based on a set of indicators. Managers may have an incentive to use earnings management to obtain indices that meet the requirements of the ANS qualification program in order to avoid showing signs of abnormality.