Title: Impact of accrual reversals on corporate performance: evidence from emerging economy

Authors: Muhammad Tahir Khan; Naveed Saif; Qadri Mohd. Al-Jabri; Haseeb Ur Rahman

Addresses: Department of Economics and Business Administration, University of Education, Lahore, Pakistan ' Department of Economics and Business, University of Lakki Marwat, KPK, Pakistan ' Department of Business Administration, University of Business and Technology, Jeddah, Saudi Arabia ' Institute of Management Sciences, University of Science and Technology Bannu, Pakistan

Abstract: This study examines the impact of accrual reversal on corporate performance. This study constructs a balanced panel data from the data for the period of 2009-2018. This study used a multivariate econometric model for examining the predictive power of accrual reversals on forecasting the firm performance. The study used the OLS estimation technique as the estimation model. Nevertheless, the relevant test results from random and fixed effect tests were opted using likelihood and Hausman test. The findings of the study revealed that accrual reversals have a significant positive effect on the company's earnings, which is considered beneficial for company growth in the emerging economy. The results help the stakeholders, managers, and investors in fully understanding the effect of accruals on firm performance and predicting the future performance of a firm. However, listed firms must increase the total accruals reversal to attract investment and enhance performance.

Keywords: accrual reversals; earnings before interest and tax; EBIT; ordinary least squares; OLS; firm performance; earning management.

DOI: 10.1504/IJMFA.2020.112362

International Journal of Managerial and Financial Accounting, 2020 Vol.12 No.3/4, pp.328 - 341

Received: 21 Jun 2020
Accepted: 26 Oct 2020
Published online: 12 Jan 2021 *

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