Earnings Management and Corporate Performance: An Empirical Evidence from Ghana

Abstract

This study aimed at assessing the impact earnings management has on corporate performance of firms on the Ghana Stock Exchange. The study used discretionary accruals of the modified jones model, abnormal cashflow from operations, abnormal discretionary expenses and abnormal production cost to measure earnings management whiles corporate performance was measured using return on assets. The study used a sample of 14 listed companies on the Ghana Stock Exchange (GSE) for the period of 2008 to 2018. We applied multiple linear regression for hypothesis testing. The findings of the study indicate that firm listed on the GSE engages earnings management and manages earnings upwards. Our results indicate earnings management through both accrual earnings and real earnings management techniques have a significant positive effect on corporate performance. Therefore, we recommend an intensive evaluation by the users of financial statements to make competent decisions.

Keywords: Accrual Earnings Management, Real Earnings Management, Discretionary Accruals, Corporate Performance

DOI: 10.7176/RJFA/11-10-01

Publication date:May 31^st 2020