Earnings management through overproduction and subsequent performance: an empirical study in Pakistan
by Naila Tabassum; Ahmad Kaleem; Mian Sajid Nazir
International Journal of Indian Culture and Business Management (IJICBM), Vol. 9, No. 3, 2014

Abstract: This study aims to find the impact of real earnings management on future financial performance. Abnormal cost of production is considered as proxy of real earnings management which is calculated by using model of Dechow et al. (1998). It has been investigated that how abnormal cost of production affects financial performance measures; return on asset (ROA), return on equity (ROE) and earning per share (EPS) and price to earnings ratio (PE). Manufacturing sector of Pakistan is selected for analysis and data is collected from year 2004 to 2011. Generalised least square regression has been applied for analysis. It has been revealed that firms engaged in real earnings management through overproduction face lower financial performance in subsequent years.

Online publication date: Sat, 13-Sep-2014

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