Political stability, political rights and earnings management: some international evidence

Tesfaye Taddese Lemma, Ayalew Lulseged, Mthokozisi Mlilo and Minga Negash

Accounting Research Journal, 2020, vol. 33, issue 1, 57-74

Abstract: Purpose - This study aims to examine the impact of political stability and political rights on firm-level earnings (both accrual-based and real) management. Design/methodology/approach - The authors develop models that link political stability, political rights, and the interplay between the two and earnings (both accrual-based and real) management. The authors analyze 63,872 firm-year observations of publicly listed, non-financial, firms drawn from 39 countries, for the period 1995 to 2016. Findings - The authors find that political stability (political rights) attenuates (accentuates) accrual-based earnings management; political rights (political stability) accentuates (have no effect on) real earnings management; and the association between political rights and real earnings management is more pronounced in countries with better political stability. Practical implications - The findings imply that users of financial statements should take cognizance of a country’s ambient political environment in assessing the potential for earnings management by firms. Originality/value - No prior research examined the role of political forces in shaping firm-level earnings management behavior in a cross-country setting.

Keywords: Earnings management; Financial reporting quality; Political stability; Political rights (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

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:eme:arjpps:arj-11-2017-0182

DOI: 10.1108/ARJ-11-2017-0182

Access Statistics for this article

Accounting Research Journal is currently edited by Professor Reza Monem

More articles in Accounting Research Journal from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().