The Impact of Quality of Financial Information on the Decline of Food Manufacturing Companies in the European Union

Masidivinga Landu, Jorge Mota, Ana Maria Bandeira and António Carrizo Moreira

Cuadernos de Gestión, 2026

Abstract: [EN] This study examines the relationship between quality of financial information (QFI) and the probability of corpo-rate decline in the food manufacturing sector within the European Union (EU) controlled by a set of internal (age, size, liquidity, return on assets, and debt) and external (gross domestic product and unemployment rate) determi-nants. The study employs a logit regression model applied to a balanced panel dataset of 335 large food manufactur-ing firms in the EU from 2011 to 2021. Quality of financial information is estimated using discretionary accruals, based on the Jones model (1991), while corporate decline is measured by fluctuations in sales. The findings indicate that low-quality financial information (high discretionary accruals) is positively associated with corporate decline, highlighting the role of financial transparency in business sustainability. The results suggest that earnings man-agement practices can increase business vulnerability, reinforcing the importance of accurate financial reporting in mitigating corporate failure. The study underscores the need for enhanced regulatory oversight and financial reporting transparency in the food manufacturing industry. Policymakers and stakeholders should strengthen fi-nancial disclosure requirements to curb earnings management practices and ensure better resource allocation for long-term sustainability. This research contributes to the limited literature on quality of financial information and corporate decline, particularly in the food manufacturing sector, which is crucial for economic stability and public welfare. By integrating financial reporting quality into corporate failure analysis, this study provides new insights into the role of earnings management in business deterioration.

Keywords: quality of financial information; business decline; earnings management; discretionary accruals; food manufacturing industry; corporate sustainability; calidad de la información financiera; deterioro corporativo; gestión de ganancias; devengos discrecionales; industria de manufactura de alimentos; sostenibilidad corporativa (search for similar items in EconPapers)
Date: 2026
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