Earnings management strategies during financial difficulties: A comparison between listed and unlisted French companies

The impact of financial difficulties on earnings management strategies: The case of Italian non-listed firms

“…Our research should provide some context for both academics and practitioners when analysing the reliability of financial information in Italian non-listed firms suffering from financial distress risk. To assess financial distress risk, we employ Altman's Z-Score, the validity of which is confirmed by Altman et al (2017), and this established approach is employed extensively in the empirical literature (Habib et al, 2013;Nagar and Sen, 2016;Campa, 2019). Our findings suggest that increasing financial distress risk leads to greater income-decreasing earnings management, indicating that firms in technical default are more likely than healthy firms to managing their earnings downward.…”

“…As discussed earlier, the literature identify several proxies for financial distress, including: debt covenant violation (DeFond and Jimbalvo, 1994;Jha, 2013); persistent loss occurrence (DeAngelo et al, 1994); bankruptcy status (Rosner, 2003;Garcia-Lara et al, 2009;Bisogno and De Luca, 2015); Ohlson's O-score default prediction model (Ranjbar and Farsad Amanollahi, 2018); firm free cash flows (Mohammadi and Amini, 2016); the Fich and Slezak (2008) ratio (Campa, 2019); and Altman's Z-Score (Agrawal and Chatterjee, 2015;Nagar and Sen, 2016;Campa, 2019), the latter used widely in the literature.…”

“…Consistent with the extant research examining the determinants of earnings management, Equation 7 includes several control variables (Dechow et al, 1995;Kothari et al, 2005;Jelinek, 2007;Dechow et al, 2010;Mariani et al, 2010;Bisogno, 2012;Habib et al, 2013;Shan et al, 2013;Agrawal and Chatterjee, 2015;Bisogno and De Luca, 2016;Humeedat, 2018;Lazzem and Jilani, 2018;Ranjbar and Farsad Amanollahi, 2018;Campa, 2019) which are likely to impact on earnings management initiatives.…”

“…In the extant literature, to our best knowledge, only Campa (2019) investigates earnings management initiatives in both listed and non-listed firms experiencing financial difficulties, and finds that French firms of both type are likely to manage earnings downward as financial difficulties worsen. Unfortunately, the findings of Campa's research do not provide evidence on the impact of financial distress on the earnings management incentives of non-listed firms as they only compare the earnings management strategies of listed and non-listed firms experimenting financial difficulties.…”

Innovations in the Company’s Earning Management: The Case for the Czech Republic and Slovakia

“…The mutual dependence between accrual and real earnings management is investigated by Hamza and Kortas (2019). The findings of Campa (2019) confirmed that the enterprise listed on the stock exchange is more affected by the income-increasing earnings management behaviours compared to unlisted enterprises. The mutual dependence between social trust environment and earning management is investigated in the research of Chen et al, (2019).…”