Do firms substitute earnings management methods? The case of the MENA region

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Published Dec 7, 2020
Tarek Elkalla


The purpose of this paper is to empirically test whether firms substitute accruals-based earnings management with real activities-based earnings management or complement the two methods in the MENA region. Further, this paper seeks to investigate the impact of IFRS adoption on accruals-based earnings management. To test the research hypotheses, this paper employs a panel fixed-effects regression model for a sample of 798 non-financial listed MENA region firms over the period 2008-2015, inclusively. The research findings provide evidence that firms complement accruals-based and real activities-based earnings management methods rather than substituting one earnings management method for the other, which suggests that MENA firms conduct both methods concurrently to achieve earnings targets and are not constrained by the relative costs of employing a particular method. Furthermore, a significant positive association between GDP growth and accruals-based earnings management is found, which provides evidence that economic growth leads to a greater degree of accruals-based earnings management behavior in MENA region firms. 

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Elkalla, T. (2020). Do firms substitute earnings management methods? The case of the MENA region . Journal of Research in Emerging Markets, 3(1), 32–43.
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Article Details


Accruals-based earnings management, Real Earnings Management, IFRS Adoption



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