Title: Earnings manipulation and firm performance: evidence from Jordan

Authors: Adel K. Almasarwah; Adel M. Sarea; Malik Abu Afifa; Yahya Marei

Addresses: Accounting Department, Business School, The Hashemite University, Jordan ' Accounting and Economics Department, Ahlia University, Kingdom of Bahrain ' Accounting Department, Business School, Al-Zaytoonah University of Jordan, Jordan ' Accounting Department, Business School, Seneca College, Canada

Abstract: This paper examines the link between earnings management and firm performance in Jordanian listed firms in the context of emerging markets. Panel data robust regression analysis of accruals and real earnings management was performed using modified Jones, Roychowdhury of abnormal cash flow, Roychowdhury of abnormal production, and Roychowdhury of abnormal discretionary expenses against firm performance proxies such as the returns on equity and assets, and earnings per share. Mixed results with detail to the abilities of the earnings management models estimated values. Modified Jones, Roychowdhury of abnormal cash flow and Roychowdhury of abnormal production positively related to all firm performance proxies (return on assets, return on equity and earnings per share). Roychowdhury of abnormal discretionary expenses has an insignificant relationship with all firm performance proxies. In addition, our findings offer new evidence about the consequences of earnings management (real and accruals) and three proxies of firm performance. Our results provide clear earnings management motivations that could be used in order to engage in earnings management in Jordanian listed firms.

Keywords: real earnings management; REM; accruals earnings management; robust regression; performance proxies; Jordan.

DOI: 10.1504/IJCA.2021.116344

International Journal of Critical Accounting, 2021 Vol.12 No.3, pp.259 - 278

Received: 16 Nov 2020
Accepted: 10 Feb 2021
Published online: 20 Jul 2021 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article