Earnings management across publicly traded and privately held French SMEs

Ludovic Vigneron and Yves Mard

International Journal of Entrepreneurship and Small Business, 2016, vol. 29, issue 3, 416-440

Abstract: We study how SMEs' financial choices affect the quality of accounting information in the French case. Using a sample of 925 firms observed over a nine year period, we compare earnings management practices between publicly traded SMEs (hereafter PUB_SMEs) and privately held ones (hereafter PRIV_SMEs). We find evidence, firstly, that access to the stock market encourages SMEs to manage earnings so as to appear to be performing better, secondly, that SMEs that do not benefit from such access use proprietary earnings management to appear less risky. The first appear to be more shareholder-oriented and the second more lender-oriented in their earnings management practices. PRIV_SMEs manipulate their net income to avoid small losses more frequently than PUB_SMEs. We also notice more pronounced income-smoothing behaviour among PRIV_SMEs than among PUB_SMEs. An analysis of discretionary accruals shows that PUB_SMEs use accruals to increase their apparent performance more intensively than PRIV_SMEs.

Keywords: earnings management; privately held firms; publicly traded firms; SMEs; small and medium-sized enterprises; earnings distribution; income smoothing; discretionary accruals; France; financial choices; information quality; accounting information; stock market access. (search for similar items in EconPapers)
Date: 2016
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Working Paper: Earning Management accross Publicly Traded and Privately Held French SMEs (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijesbu:v:29:y:2016:i:3:p:416-440

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