This article makes an attempt to empirically examine the relationship between financial distress and earnings management with reference to selected Indian firms. Our sample consists of 150 financially distressed firms during the post-recession period from 2009 to 2014. The present study uses discretionary accruals (DA) as a proxy for earnings management. Multiple regression analysis has been used for this purpose. The study uses cross-sectional modified Jones model to estimate DA, a proxy for earnings management. Altman's Z-score (Z-score) and distance-to-default (DD) have been used as two alternative measures for financial distress. The study finds that less distressed firms are engaged in higher earnings management. Cash flow coverage (CFC) is found to have a significant negative relationship with earnings management implying that firms with higher CFC have lesser incentive to manage their earnings through DA. The findings are consistent with several prior studies. The findings of the study have important implications for lenders, investors and managers. Lenders and investors need to be wary of the fact that firms experiencing even low levels of distress might be more prone to concealing their true financial condition. This provides deeper insights into the reliability of accounting information in assessing the creditworthiness of a firm.

This article examines whether board qualities influence the earnings management behaviour of firms in a large emerging market set-up by using panel data of 783 Indian private manufacturing firms over a period of 7 years (April 2009–March 2016). The study finds that it is board quality that helps in curbing earnings manipulation and not just board independence. Results reveal that diligent and busy boards help in reducing earnings management, CEO duality affects the quality of reported earnings and promoters’ influence on boards increases earnings management. Domestic or foreign institutional investors do not have any independent impact on earnings management. However, domestic institutional ownership reduces earnings management when promoters’ influence exists. The article contributes to the literature by focusing on whether corporate governance (CG) mechanisms are important in curbing earnings management in an emerging market context. The findings are expected to be helpful to policymakers and regulators while framing appropriate CG policies and regulations.

This article empirically examines the price behaviour around cash dividend announcements of the firms listed on the National Stock Exchange of India Ltd (NSE) in order to understand whether dividend announcements really influence stock returns in the market and carry meaningful information to the investors in the existence of corporate dividend tax. The article uses standard ‘event study’ methodology based on market model on a sample of 210 dividend announcements. Subsample analysis is employed for further analysis of firms of different categories. The study finds that cash dividend announcements do not necessarily generate abnormal stock returns in an emerging market, such as India. The whole sample is further divided into various subsamples on the basis of firm size and the size of payout ratio. The study finds that large payout firms experience greater stock returns compared to the smaller payout firms just after the dividend announcements. However, stock returns following dividend announcements do not vary across firm size. This article provides evidence to the managers about the non-linkage between cash dividend announcements and stock returns in an emerging market like India. This finding is contrary to the findings of many other studies that are based on the data of the developed economies.

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The article examines whether different corporate governance practices and ownership patterns influence firm performance and value creation in an emerging market context. The study establishes that the governance–performance relation depends highly on the estimation tools applied. While the pooled regression or fixed effects panel model may provide spurious and biased relations, the system generalized method of moments (GMM) model provides superior and valid results by addressing all types of endogeneity problems. The results show that firms with a separate CEO and chairperson outperform firms with CEO duality. Also, higher executive salary leads to improved firm performance. Moreover, higher promoter shareholding leads to greater value creation and improved firm performance, and domestic institutional investors (DII) have a significant impact on firm performance.