Anti-corruption corporate disclosures and earnings management: evidence from a developed market

Mohamed Esmail Elmaghrabi and Ahmed Diab

Journal of Financial Crime, 2023, vol. 31, issue 6, 1302-1319

Abstract: Purpose - This study aims to examine the association between anti-corruption corporate disclosure and earnings management practices by bringing evidence from a developed market. Design/methodology/approach - The study uses data from non-financial FTSE 100 Shares in 2016 and 2017. This study develops a disclosure index to capture the anti-corruption disclosures and run pooled, fixed effects and generalized methods of moments regression models to explore the anti-corruption disclosure–earnings management association. This study also disentangles discretionary accruals into positive and negative, use adjusted discretionary accrual computation and take a more conservative view on discretionary accruals computation as an additional analysis. Findings - The results show a negative and significant association between anti-corruption disclosure and earnings management practices. When disentangling discretionary accruals (overvalued/positive and undervalued/negative), the authors found that higher anti-corruption disclosures were negatively associated with positive discretionary accruals, but not associated with negative discretionary accruals. The additional analysis confirmed the previous results, showing that anti-corruption disclosures are perceived as a substantive practice, rather than a mere disclosure practice for legitimacy reasons. Originality/value - This study contributes to debate on the symbolic versus the substantive uses of anti-corruption disclosures in the UK context.

Keywords: Anti-corruption; Earnings management; UK; Symbolic; Substantial (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-09-2023-0235

DOI: 10.1108/JFC-09-2023-0235

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