Title: Do Tunisian firms manage earnings to attain thresholds?

Authors: Asma Houcine; Samah Halaoua

Addresses: Accounting department, Emirates College of Technology, Abu Dhabi, UAE; Accounting and Finance Department, Higher School of Economic and Business of Tunis (ESSECT), University of Tunis, Tunisia ' Accounting and Finance department, Higher Institute of Management, University of Sousse, Abdlaaziz il Behi Street, Sousse 4000, Tunisia; GEF-2A Lab, University of Tunis, Tunis, Tunisia

Abstract: The purpose of this study is to examine the extent to which Tunisian listed firms manage their results to avoid losses and earning decreases, and to investigate the determinants of such behaviour. The factors which we selected were derived from the positive accounting theory applied to the earnings management thresholds. Based on a panel data of 375 firm-year observations during the period 2002-2014, we provide evidence that firms tend to engage in earnings management to avoid reporting losses and earnings decreases. Considering earnings management incentives, the results reveal that growth opportunities have positive effect on earnings management thresholds, suggesting that Tunisian firms manage earnings around thresholds in a signalling purpose rather than opportunistic one. We also found that firm size and taxes have negative effect, which confirm the political costs hypothesis that larger firms tend to report earnings lower than last year in order to pay lower taxes.

Keywords: earnings distribution approach; earnings thresholds; political costs; positive accounting theory; signalling motivation.

DOI: 10.1504/IJMFA.2017.084047

International Journal of Managerial and Financial Accounting, 2017 Vol.9 No.1, pp.19 - 43

Received: 16 May 2016
Accepted: 02 Jan 2017

Published online: 21 Apr 2017 *

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