The effect of the COVID-19 pandemic on accrual-based earnings management: Evidence from four most affected European countries

Alpaslan Yaşar; Neriman Yalçın

doi:10.1016/j.heliyon.2024.e29890

The effect of the COVID-19 pandemic on accrual-based earnings management: Evidence from four most affected European countries

Heliyon. 2024 Apr 18;10(8):e29890. doi: 10.1016/j.heliyon.2024.e29890. eCollection 2024 Apr 30.

Authors

Alpaslan Yaşar¹, Neriman Yalçın¹

Affiliation

¹ Department of Business, Adana Alparslan Türkeş Science and Technology University, 01250, Adana, Turkiye.

Abstract

This study aims to investigate the effect of the COVID-19 pandemic on accrual-based earnings management (EM) based upon a sampling of 938 listed firms from four selected European countries (United Kingdom, Italy, Spain, and Türkiye) during 2016-2020. We find that firms engage more in accrual-based EM through income-increasing and income-decreasing accruals in the year of the COVID-19 pandemic relative to the period before the pandemic. These findings imply that financial reporting reliability and usefulness decreased in the period of the pandemic. Our results are robust to some sensitivity checks.

Keywords: Accrual-based earnings management; COVID-19 pandemic; Income increasing/decreasing earnings management.