The trilogy of economic policy uncertainty, earnings management and firm performance: empirical evidence from France

Ines Kahloul (), Jocelyn Grira () and Khawla Hlel ()
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Ines Kahloul: Sousse University
Jocelyn Grira: Athabasca University
Khawla Hlel: Sousse University

Journal of Economics and Finance, 2023, vol. 47, issue 1, No 9, 184-206

Abstract: Abstract This paper investigates the effect of earnings management practices on firm performance and focuses on how economic policy uncertainty (EPU) moderates the association between earnings management and firm performance. The analysis is based on a sample of French listed companies on the CAC ALL tradable index for the period from 2010 to 2017. Our results show that earnings management is positively associated with firm performance. This finding suggests that accrual- based earnings management, real earnings management and classification shifting are beneficial when managers use accounting choices to reduce agency costs and create value for shareholders. We also find that high EPU triggers a credible signal of lower disclosure quality. It plays an important role in promoting the opportunistic use of earnings management, which harms firm performance. This study is interesting for potential investors, since it underlines the negative effect of managerial opportunistic behaviour on firm performance under policy uncertainty.

Keywords: Economic Policy Uncertainty; Earnings Management; Firm Performance (search for similar items in EconPapers)
JEL-codes: G32 G34 G38 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s12197-022-09605-8

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