 Having the government as a client: Does this reduce earnings management of the firm?Charmaine Glegg, Oneil Harris, Thanh Ngo and Jurica Susnjara Journal of Government and Economics, 2021, vol. 4, issue C Abstract: Does government contracting translate to better earnings quality and less earnings management? In this study, we seek to answer this question. We find strong evidence that government suppliers strategically substitute accrual-based earnings management with real earnings management. Firms with government customers distinctively employ greater real activities manipulation than their industry peers, as proxied by abnormal discretionary expenditures, abnormal production costs, and total real activities manipulation while avoiding accrual manipulation. These findings are robust to a host of robustness checks including measurement errors, selection bias and endogeneity. Hence, our findings have implications for procurement policy as policymakers may underestimate the total earnings management activities of government suppliers. Keywords: Government contractors; Real activities management; Accruals management (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jogoec:v:4:y:2021:i:c:s2667319321000227 DOI: 10.1016/j.jge.2021.100022 Access Statistics for this article Journal of Government and Economics is currently edited by David Li, Eric Maskin and Zhangkai Huang More articles in Journal of Government and Economics from Elsevier |
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