Political elections uncertainty and earnings management: Does firm size really matter?

Tiago Gonçalves (), Victor Barros and Gonçalo Serra

Economics Letters, 2022, vol. 214, issue C

Abstract: This study provides evidence on whether political elections uncertainty is associated with firms’ earnings management in election years in 15 European countries, using a sample of 16,868 firm–year observations from 3,096 unique firms in the period 2011–2018. We find that earnings management increases in uncertain political environments. This occurs mostly in years of extreme elections uncertainty as in the case of elections won by a margin of less than 5%, including close calls with a change of the ruling party to a different political spectrum. Firms increase earnings management activity to decrease earnings except in the case of SMEs who behave conversely by increasing earnings, arguably on the basis of increased scrutiny risk.

Keywords: Political elections uncertainty; Earnings management; Earnings quality (search for similar items in EconPapers)
JEL-codes: D72 M40 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176522000921
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:214:y:2022:i:c:s0165176522000921

DOI: 10.1016/j.econlet.2022.110438

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().