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Earnings management through overproduction and subsequent performance: an empirical study in Pakistan

Author

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  • Naila Tabassum
  • Ahmad Kaleem
  • Mian Sajid Nazir

Abstract

This study aims to find the impact of real earnings management on future financial performance. Abnormal cost of production is considered as proxy of real earnings management which is calculated by using model of Dechow et al. (1998). It has been investigated that how abnormal cost of production affects financial performance measures; return on asset (ROA), return on equity (ROE) and earning per share (EPS) and price to earnings ratio (PE). Manufacturing sector of Pakistan is selected for analysis and data is collected from year 2004 to 2011. Generalised least square regression has been applied for analysis. It has been revealed that firms engaged in real earnings management through overproduction face lower financial performance in subsequent years.

Suggested Citation

  • Naila Tabassum & Ahmad Kaleem & Mian Sajid Nazir, 2014. "Earnings management through overproduction and subsequent performance: an empirical study in Pakistan," International Journal of Indian Culture and Business Management, Inderscience Enterprises Ltd, vol. 9(3), pages 267-282.
    • Handle: RePEc:ids:ijicbm:v:9:y:2014:i:3:p:267-282
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    Citations

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    Cited by:

    1. Asim, Aysha & Ismail, Aisha, 2019. "Impact of Leverage on Earning Management: Empirical Evidence from the Manufacturing Sector of Pakistan," Journal of Finance and Accounting Research, University of Management and Technology, Lahore, vol. 1(1), pages 70-91, February.
    2. Saoussen Boujelben & Hela Khemakhem-Feki & Ahmad Alqatan, 2020. "Real earnings management and the relevance of operating cash flows: A study of french listed firms," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 17(4), pages 218-229, December.
    3. Muhammad Ahmad, Ahmad & Sunday, Inyada, 2023. "Assessing Audit Committee Effectiveness on Real Earnings Management of Listed Non-Financial Firms in Nigeria," Multidisciplinary Journal of Social Sciences, Association of Forensic Accounting Researchers (AFAR), vol. 3(1), pages 181-196, June.

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