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Earning Management accross Publicly Traded and Privately Held French SMEs

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  • Ludovic Vigneron

    (GERME - Groupe d'études et de recherches en management des entreprises (EA n° 4112) - ESA - Ecole Supérieure des Affaires de l'Université Lille 2 - Université de Lille, Droit et Santé, IDP - Institut du Développement et de la Prospective - EA 1384 - UVHC - Université de Valenciennes et du Hainaut-Cambrésis - IAE - Institut d'Administration des Entreprises - UPHF - Université Polytechnique Hauts-de-France)

  • Yves Mard

    (CRCGM - Centre de Recherche Clermontois en Gestion et Management - UdA - Université d'Auvergne - Clermont-Ferrand I - ESC Clermont-Ferrand - École Supérieure de Commerce (ESC) - Clermont-Ferrand)

Abstract

We study how SMEs' financial choices affect the quality of accounting information in the French case. Using a sample of 925 firms observed over a nine year period, we compare earnings management practices between publicly traded SMEs (hereafter PUB_SMEs) and privately held ones (hereafter PRIV_SMEs). We find evidence, firstly, that access to the stock market encourages SMEs to manage earnings so as to appear to be performing better, secondly, that SMEs that do not benefit from such access use proprietary earnings management to appear less risky. The first appear to be more shareholder-oriented and the second more lender-oriented in their earnings management practices. PRIV_SMEs manipulate their net income to avoid small losses more frequently than PUB_SMEs. We also notice more pronounced income-smoothing behaviour among PRIV_SMEs than among PUB_SMEs. An analysis of discretionary accruals shows that PUB_SMEs use accruals to increase their apparent performance more intensively than PRIV_SMEs.

Suggested Citation

  • Ludovic Vigneron & Yves Mard, 2016. "Earning Management accross Publicly Traded and Privately Held French SMEs," Post-Print hal-02926874, HAL.
    • Handle: RePEc:hal:journl:hal-02926874
    DOI: 10.1504/IJESB.2016.079418
    Note: View the original document on HAL open archive server: https://uphf.hal.science/hal-02926874
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