The Role of Governance and Reserves in Revenue Management Practices

Henry Paul

Department of Social Science, University of Monash, Melbourne, Australia

*Corresponding Author:

Henry Paul
Department of Social Science,
University of Monash,
Melbourne, Australia
E-mail: henrypaul@yahoo.com

Received date: 22-02-2023, Manuscript No. JIBC-23-93389; Editor assigned date: 24-02-2023, Pre QC No. JIBC-23-93389 (PQ); Reviewed date: 10-03-2023, QC No. JIBC-23-93389; Revision date: 17-03-2023, Manuscript No: JIBC-23-93389 (R); Published date: 27-03-2023

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Description

Revenue management, also known as earnings management, is the process of influencing financial reporting in order to accomplish specific goals. These goals could include meeting analyst expectations, keeping a specific degree of accounting treatment, or increasing revenue. While revenue management can be advantageous in some situations, it can also result in misleading financial accounts and unethical practices.

Profit management measurement is a critical problem for both investors and stockholders. Investors assess a firm's efficacy on the stock market based on the measurement model of choice for managing earnings. In this series of studies, they try to demonstrate and contrast four models for measuring revenue management based on the availability of information on the Tunisian stock exchange. They classified the parameter as higher or lower levels of "discretionary accruals" and looked at how it impacted returns. The findings show significant coefficient accruals for the two degrees of discretionary.

Earnings management is a crucial concern for shareholders and financiers. Investor evaluation of a company necessitates the selection of a model for measuring earnings management. Their study attempts to forecast managers' actions by presenting and contrasting four earnings management measurement methods in terms of the Tunisian stock market's informational substance market.

In Tunisia, few studies have been conducted to investigate the relationship between accounting and returns and manipulation, despite the fact that researchers' problems usually address manipulation. However, numerous studies in the United States have explicitly studied research funding management as a subject or setting.

This is largely due to the country's stringent financial and accounting regulations, which prohibit frequent changes in account styles and require fiscal communication content to adhere to a set of rules, especially when it comes to disclosing profits. It appears to be leading to an expansion in the way profit operations are carried out. Yield management is the process of directing a company's profits towards predetermined objectives.

This objective may be driven by a desire for more stable income, in which case income smoothing will be performed by the manager. Opportunistic income smoothing is linked with lower risk and increased enterprise market value. Other possible revenue management motivations include the need to keep a certain level of accounting treatment due to liabilities, as well as the need to maintain and increase revenues. It involves the pressure to outperform analyst targets.

Revenue management may entail making accounting decisions that alter the quantity of revenue reported in the financial statements. Accounting choices can have an impact on the timing of transactions and the estimates used in financial reporting, which can have an impact on earnings. For example, a small change in bad debt estimates can have a significant effect on net income, and businesses that use the last-in, first-out method for inventory may invest in purchases to reduce net income during periods of rising prices.

Individual investors may find revenue management difficult to understand due to the complexities of accounting regulations, but accounting researchers have proposed several methods. According to research, firms with greater reserves and weaker governance structures are more apt to engage in revenue management. Recent study indicates that financial manipulation can be discovered using linguistics-based methods. Function of governance and reserves in revenue management practices is a critical issue for investors and the broader economy. While revenue management can be advantageous in some situations, it can also lead to unscrupulous practices and false financial statements. They can help ensure that businesses prioritise ethical behaviour and accurate financial reporting by increasing transparency and disclosure and strengthening regulatory oversight, which will eventually benefit for investors and society.