Service quality and earnings management in Brazilian electricity distributors

Paulo Vitor Souza de Souza and Edilson Paulo

Journal of Economics, Finance and Administrative Science, 2025, vol. 30, issue 60, 250-267

Abstract: PurposeThis article examines the relationship between service quality and earnings management in Brazilian electricity distributors.Design/methodology/approachService quality was measured using the Global Continuity Performance Indicator, as released by the Brazilian Electricity Regulatory Agency (ANEEL). To measure earnings management, the models by Dechow et al. (1995), Kothari et al. (2005), and Pae (2005) were used.FindingsThe results show that lower service quality is related to greater opportunism in management through earnings management. Furthermore, the study shows that managing earnings can distort the true economic and financial position of companies with low operational performance.Research limitations/implicationsThe research enhances comprehension regarding the correlation between service quality, measured by the Global Continuity Performance Indicator, and earnings management within a distinct industrial and regulatory framework. This could establish a foundation for prospective studies delving into analogous relationships across diverse sectors or regions.Practical implicationsThe findings offer insights for regulatory authorities to promote higher standards in the generation of informational quality, which can impact the quality of services.Social implicationsEnhancing the quality of electrical service through more responsible management practices leads to increased consumer satisfaction, driven by improvements in the continuity of energy supply.Originality/valueA gap exists in the literature due to the lack of studies examining the relationship between the quality of electrical service, measured by the continuity index, and opportunistic management practices through earnings management.

Keywords: Global continuity performance; Earnings management; Brazilian electricity sector; Earnings quality (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jefasp:jefas-02-2024-0047

DOI: 10.1108/JEFAS-02-2024-0047

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