Accounting Manipulation and Value Creation: An Empirical Study of EVA and Accounting Quality in NYSE and NASDAQ Companies

Szilárd Hegedűs (), Ervin Denich and Áron Lajos Baracsi
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Szilárd Hegedűs: Department of Accounting, Faculty of Finance and Accountancy, Budapest University of Economics and Business, 1149 Budapest, Hungary
Ervin Denich: Department of Accounting, Faculty of Finance and Accountancy, Budapest University of Economics and Business, 1149 Budapest, Hungary
Áron Lajos Baracsi: Department of Accounting, Faculty of Finance and Accountancy, Budapest University of Economics and Business, 1149 Budapest, Hungary

JRFM, 2025, vol. 18, issue 10, 1-33

Abstract: Accounting manipulation undermines the integrity of financial reporting and can distort key performance indicators, yet its quantitative effects on accounting quality (AQ) and value-related metrics remain underexplored. This study analyses U.S. publicly traded firms involved in accounting manipulation between 2017 and 2019, comparing them with matched non-manipulative industry peers to assess differences in AQ. It also examines potential links between manipulation-related AQ distortions and changes in Economic Value Added (EVA), stock prices, trading volumes, and dividend payouts. The sample includes 57 manipulation-affected firms and 57 matched controls, identified through SEC enforcement filings and the Violation Tracker database. Financial and stock data were sourced from EDGAR, ORBIS, and Morningstar. AQ was measured using discretionary accruals estimated via the Kasznik model. Correlation analysis tested associations between AQ and the selected performance indicators. Results show that firms involved in accounting manipulations had significantly lower AQ than their peers. However, no consistent correlations were found between AQ and EVA, dividends, stock prices, or volumes during the manipulation period. These findings suggest that the performance effects of manipulations are case-specific and shaped by additional factors, underscoring the importance of strong regulatory oversight and high-quality accounting practices. Ethically, our evidence underscores that misreporting corrodes investor trust and the public-interest mandate of financial reporting; accordingly, we stress the duties of boards, executives, auditors, and regulators to uphold faithful representation and timely disclosure, and to remediate misreporting when detected.

Keywords: accounting fraud; accounting manipulation; accounting quality; publicly traded firms; US; NYSE; NASDAQ; economic value added (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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