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The trilogy of economic policy uncertainty, earnings management and firm performance: empirical evidence from France

Author

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  • Ines Kahloul

    (Sousse University)

  • Jocelyn Grira

    (Athabasca University)

  • Khawla Hlel

    (Sousse University)

Abstract

This paper investigates the effect of earnings management practices on firm performance and focuses on how economic policy uncertainty (EPU) moderates the association between earnings management and firm performance. The analysis is based on a sample of French listed companies on the CAC ALL tradable index for the period from 2010 to 2017. Our results show that earnings management is positively associated with firm performance. This finding suggests that accrual- based earnings management, real earnings management and classification shifting are beneficial when managers use accounting choices to reduce agency costs and create value for shareholders. We also find that high EPU triggers a credible signal of lower disclosure quality. It plays an important role in promoting the opportunistic use of earnings management, which harms firm performance. This study is interesting for potential investors, since it underlines the negative effect of managerial opportunistic behaviour on firm performance under policy uncertainty.

Suggested Citation

  • Ines Kahloul & Jocelyn Grira & Khawla Hlel, 2023. "The trilogy of economic policy uncertainty, earnings management and firm performance: empirical evidence from France," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 47(1), pages 184-206, March.
    • Handle: RePEc:spr:jecfin:v:47:y:2023:i:1:d:10.1007_s12197-022-09605-8
    DOI: 10.1007/s12197-022-09605-8
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    More about this item

    Keywords

    Economic Policy Uncertainty; Earnings Management; Firm Performance;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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