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Financial distress and earnings management before and during COVID-19 pandemic

Author

Listed:
  • Novy Fajriati
  • Ersa Tri Wahyuni
  • Dini Rosdini

Abstract

This study aims to investigate the influence of financial distress on accrual earnings management and real earnings management before and during the COVID-19 pandemic. Using purposive sampling method, the study employs energy, transportation and logistic companies between 2018 and 2021. Total sample of 236 firm-year observations data were analyzed in this study using regression approach. The study finds that financial distressed firms tend to engage less in real earnings management before and during Covid-19 pandemic. In contrast, the firm’s financial distress does not affect the practice of accrual earnings management before and during Covid-19 pandemic. This research contributes to the discussion of financial distress and earnings management by looking more closely to the company mostly affected by the pandemic. The findings suggest the lenders and investors should have more caution and deeper insight for determining a firm’s credit worthiness since low distressed firms have a tendency to engage in earnings management.

Suggested Citation

  • Novy Fajriati & Ersa Tri Wahyuni & Dini Rosdini, 2023. "Financial distress and earnings management before and during COVID-19 pandemic," Jurnal Akuntansi dan Auditing Indonesia, Accounting Department, Faculty of Business and Economics, Universitas Islam Indonesia, vol. 27(1).
    • Handle: RePEc:uii:jaaife:v:27:y:2023:i:1:id:25911
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