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Political competition as a motivation for earnings management close to zero: the case of Portuguese municipalities

Author

Listed:
  • Augusta Ferreira
  • João Carvalho
  • Fátima Pinho

Abstract

Purpose - The main purpose of this paper is to evaluate if, motivated by political competition, municipalities engage in earnings management practices through discretionary accruals. Design/methodology/approach - Quantitative methodology. Findings - Results indicate that, in those municipalities where political competition is greatest, there is a greater tendency to report positive net earnings close to zero. This study also indicates that for such purpose, discretionary accruals are used. Originality/value - The purpose of this paper is to respond to the lack of information in the area of earnings management in the public sector, to be able to evaluate responsibility, performance and efficiency regarding the allocation of public resources and the degree of satisfaction of citizens/voters' needs-accountability.

Suggested Citation

  • Augusta Ferreira & João Carvalho & Fátima Pinho, 2020. "Political competition as a motivation for earnings management close to zero: the case of Portuguese municipalities," Journal of Public Budgeting, Accounting & Financial Management, Emerald Group Publishing Limited, vol. 32(3), pages 461-485, July.
    • Handle: RePEc:eme:jpbafm:jpbafm-10-2018-0109
    DOI: 10.1108/JPBAFM-10-2018-0109
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