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Is environmental turbulence associated with earnings management?

Author

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  • Jangho Gil
  • Kunsu Park
  • Jonghyuk Bae
  • Young Mok Choi

Abstract

It is essential for firms to adjust their capabilities and strategies when facing turbulent environments in industries. Despite this importance, there is limited evidence on how environmental turbulence affects corporate behaviour. Therefore, this study examines whether environmental turbulence (proxied by industry technological and market turbulences) is associated with earnings management. Using the pooled ordinary least square (OLS) regression model based on a sample of US firms between 1987 and 2022, this paper finds that firms facing highly turbulent industry environments engage in more earnings management. These findings remain robust to alternative measures of earnings management, alternative proxies for environmental turbulence, alternative estimation specifications, and endogeneity issues. This study contributes to prior research by shedding light on the importance of industry environment characteristics on a firm’s earnings management.

Suggested Citation

  • Jangho Gil & Kunsu Park & Jonghyuk Bae & Young Mok Choi, 2026. "Is environmental turbulence associated with earnings management?," Applied Economics Letters, Taylor & Francis Journals, vol. 33(13), pages 2179-2188, July.
    • Handle: RePEc:taf:apeclt:v:33:y:2026:i:13:p:2179-2188
    DOI: 10.1080/13504851.2025.2522163
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