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Assessing The Impact Of The Sars-Cov-2 Pandemic On Earnings Management Behaviour In Poland

Author

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  • MichaÅ‚ Comporek

    (University of Lodz, Poland)

  • Iryna Shchyrba

    (West Ukrainian National University, Ukraine; Nottingham University Business School (NUBS), United Kingdom)

Abstract

The purpose of this paper is to investigate the impact of the SARS-CoV-2 pandemic turbulence on the extent and intensity of earnings management practices according to the opinions of representatives of non-financial companies listed on the Warsaw Stock Exchange (WSE). Methodology. This study is based on the method of standardised computer-assisted questionnaire interviews (CATI). The research sample consisted of 37.1% of all companies indexed on the WSE Main Market that do not operate in the banking, insurance or capital market services sectors. The target respondents were managers, employees of financial and accounting services and other persons authorised by the company's managerial staff representatives. Results. The survey findings showed that the economic turbulence caused by the SARS-CoV-2 pandemic contributed to an increase in earnings management activities in public companies. Respondents who reported that the companies they represented deliberately manipulated earnings were much more confident about the negative impact of the pandemic crisis on the quality of reported data. An interesting finding of the research is that respondents who had experienced earnings management in their professional practice were more likely to believe that the pandemic had distorted the credibility of reported earnings. Finally, the study provided statistical evidence that respondents from larger companies were more likely than respondents from smaller companies to say that the economic crisis related to the SARS-CoV-2 pandemic contributed to an increase in earnings management activities. Practical implications. This investigation may draw the attention of market participants to the deterioration in the financial reporting of non-financial public companies during the SARS-CoV-2 pandemic. The intensification of profit manipulation may not only distort the current perception of the company's economic performance, but also deteriorate the future value of companies. In addition, the findings provide valuable information for statutory auditors, as they highlight potential audit risks that may arise with the onset of the SARS-CoV-2 pandemic. Value/originality. Unlike most studies on the subject, this research does not focus on the estimated values of discretionary accruals, but on the knowledge and experience of financial professionals who are familiar with the specifics of the Polish capital market. An original contribution to the literature is the inclusion in the study of potential factors that could influence the respondents' perception of the impact of the consequences of the SARS-CoV-2 turbulence on the pattern and intensity of the earnings management phenomenon.

Suggested Citation

  • MichaÅ‚ Comporek & Iryna Shchyrba, 2024. "Assessing The Impact Of The Sars-Cov-2 Pandemic On Earnings Management Behaviour In Poland," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 10(1).
    • Handle: RePEc:bal:journl:2256-0742:2024:10:1:1
    DOI: 10.30525/2256-0742/2024-10-1-1-10
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    References listed on IDEAS

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    1. Gustavo Grullon & David L. Ikenberry, 2000. "What Do We Know About Stock Repurchases?," Journal of Applied Corporate Finance, Morgan Stanley, vol. 13(1), pages 31-51, March.
    2. Shathees Baskaran & Nalini Nedunselian & Chun Howe Ng & Nomahaza Mahadi & Siti Zaleha Abdul Rasid, 2020. "Earnings management: a strategic adaptation or deliberate manipulation?," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 27(2), pages 369-386, January.
    3. Diego Prior & Jordi Surroca & Josep A. Tribó, 2008. "Are Socially Responsible Managers Really Ethical? Exploring the Relationship Between Earnings Management and Corporate Social Responsibility," Corporate Governance: An International Review, Wiley Blackwell, vol. 16(3), pages 160-177, May.
    4. Zeff, Stephen A., 2007. "Some obstacles to global financial reporting comparability and convergence at a high level of quality," The British Accounting Review, Elsevier, vol. 39(4), pages 290-302.
    5. Shaista Wasiuzzaman, 2018. "Industry characteristics and earnings management: a study of Malaysian industries," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 13(5), pages 837-854, November.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    profit management; profit quality; SARS-CoV-2 pandemic; listed companies; financial crisis; questionnaire survey;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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