Journal of Commerce and Accounting Research

2024 | Volume 13 | Issue Issue 2

The Impact of Firm Characteristics on Earnings Management: A Study of Firms Listed in India

1. Punita Rajpurohit – Jagdish Sheth School Of Management (formerly Ifim Business School), Bangalore, Karnataka, India.

2. Parag Rijwani – Jagdish Sheth School Of Management (formerly Ifim Business School), Bangalore, Karnataka, India.

Received
15-Feb-2024 		Accepted
- 		Published
15-Feb-2024
Abstract
This study examines the impact of firm characteristics on earnings management (EM) using a sample of listed non-financial firms in India. First, we take a comprehensive perspective to estimate EM focusing on total accruals, current accruals and specific accruals. Second, we examine firm characteristics such as size, leverage, performance, growth opportunities and industry membership that are potentially related to accruals EM. We find that: 1) Large firms and firms with high performance have higher accruals quality. 2) Firms with higher growth opportunities have lower accruals quality. 3) Firms with high leverage use accruals EM to avoid violation of debt covenants. These findings indicate that investors and regulators should take into account both: the abnormal accruals over a period of time and the variability of abnormal accruals to analyse the quality of financial reporting of large firms, firms with high performance and highly levered firms.

DOI: https://doi.org/10.21863/jcar/2024.13.2.004

Keywords Accruals Earnings Management, Earnings Management, Earnings Quality, Quality of Financial Reporting, Firm Characteristics
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