Determinants of earnings management in India: 2002-2011
by Ajit Dayanandan; Jaspreet Sra
International Journal of Accounting and Finance (IJAF), Vol. 6, No. 3, 2016

Abstract: The study examines and quantifies the extent of earnings management (EM) in India by studying a cohort of 1,150 publicly listed Indian companies (non-financial) during 2002-2011. The study shows that the average EM in the Indian non-financial corporate sector is 1.5% of the total assets of these firms in the previous year. The study also finds that EM has recorded a growth of 1.7% per annum during 2002-2011. The average discretionary accruals of small-sized firms at 3.7% were substantially higher than medium (1%) and large-sized firms (0.52%). The increases in earnings management (discretionary accruals) among small firms (4.3% per annum) were higher than those of medium (1.6% per annum) and large firms (decline of 0.5%). The empirical analysis also finds that the firm size and EM are negatively correlated. The study also finds relatively higher earnings management among agriculture, construction and services industries.

Online publication date: Fri, 20-Jan-2017

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