Earnings Management amid the COVID-19 Financial Crisis: The Experience of Poland
This study examines the consequences of the COVID-19 turbulence on the informativeness of financial reporting. Using data from non-financial public companies in Poland, our evidence documents the evolution of accrual and real earnings management during the pandemic period. We estimate earnings quali...
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| Format: | Article |
| Language: | English |
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Collegium of Economic Analysis, SGH Warsaw School of Economics
2023-03-01
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| Series: | Gospodarka Narodowa. The Polish Journal of Economics |
| Subjects: | |
| Online Access: | https://gnpje.sgh.waw.pl/Earnings-Management-amid-the-COVID-19-Financial-Crisis-The-Experience-of-Poland,159032,0,2.html |
| _version_ | 1797854646575824896 |
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| author | Joanna Lizińska Leszek Czapiewski |
| author_facet | Joanna Lizińska Leszek Czapiewski |
| author_sort | Joanna Lizińska |
| collection | DOAJ |
| description | This study examines the consequences of the COVID-19 turbulence on the informativeness of financial reporting. Using data from non-financial public companies in Poland, our evidence documents the evolution of accrual and real earnings management during the pandemic period. We estimate earnings quality with cross-sectional models, observing abnormal accruals, abnormal cash flow from operations, abnormal discretionary expenditures and abnormal production costs. We contribute to the debate on earnings management during financial crises. Specifically, discretionary accruals declined significantly during the crisis. This suggests companies were less eager to inflate earnings via accruals. Polish firms also seemed to be more inclined to adopt the ‘big bath’ strategy to inflate future income. Additionally, the research provides support for predictions that real earnings management gained importance during the turbulence when the total effect of boosting income through real transactions was significant. It suggests that during the COVID-19 crisis companies based their strategies more on the probability of being detected, rather than on the cost of such activities. The study adds to the debate on the qualitative characteristics of earnings as key accounting information and its importance in corporate finance, issues that cannot be overestimated from the perspective of company stakeholders. |
| first_indexed | 2024-04-09T20:09:27Z |
| format | Article |
| id | doaj.art-1aeffb23415c4e51ad6218bc7bb0949e |
| institution | Directory Open Access Journal |
| issn | 2300-5238 |
| language | English |
| last_indexed | 2024-04-09T20:09:27Z |
| publishDate | 2023-03-01 |
| publisher | Collegium of Economic Analysis, SGH Warsaw School of Economics |
| record_format | Article |
| series | Gospodarka Narodowa. The Polish Journal of Economics |
| spelling | doaj.art-1aeffb23415c4e51ad6218bc7bb0949e2023-04-01T06:24:20ZengCollegium of Economic Analysis, SGH Warsaw School of EconomicsGospodarka Narodowa. The Polish Journal of Economics2300-52382023-03-0131319311210.33119/GN/159032159032Earnings Management amid the COVID-19 Financial Crisis: The Experience of PolandJoanna Lizińska0https://orcid.org/0000-0002-0738-4639Leszek Czapiewski1https://orcid.org/0000-0003-3215-4090Department of Corporate Finance, Poznań University of Economics and Business, PolandDepartment of Corporate Finance, Poznań University of Economics and Business, PolandThis study examines the consequences of the COVID-19 turbulence on the informativeness of financial reporting. Using data from non-financial public companies in Poland, our evidence documents the evolution of accrual and real earnings management during the pandemic period. We estimate earnings quality with cross-sectional models, observing abnormal accruals, abnormal cash flow from operations, abnormal discretionary expenditures and abnormal production costs. We contribute to the debate on earnings management during financial crises. Specifically, discretionary accruals declined significantly during the crisis. This suggests companies were less eager to inflate earnings via accruals. Polish firms also seemed to be more inclined to adopt the ‘big bath’ strategy to inflate future income. Additionally, the research provides support for predictions that real earnings management gained importance during the turbulence when the total effect of boosting income through real transactions was significant. It suggests that during the COVID-19 crisis companies based their strategies more on the probability of being detected, rather than on the cost of such activities. The study adds to the debate on the qualitative characteristics of earnings as key accounting information and its importance in corporate finance, issues that cannot be overestimated from the perspective of company stakeholders.https://gnpje.sgh.waw.pl/Earnings-Management-amid-the-COVID-19-Financial-Crisis-The-Experience-of-Poland,159032,0,2.htmlfinancial crisiscorporate financeearnings managementsustainable accounting |
| spellingShingle | Joanna Lizińska Leszek Czapiewski Earnings Management amid the COVID-19 Financial Crisis: The Experience of Poland Gospodarka Narodowa. The Polish Journal of Economics financial crisis corporate finance earnings management sustainable accounting |
| title | Earnings Management amid the COVID-19 Financial Crisis: The Experience of Poland |
| title_full | Earnings Management amid the COVID-19 Financial Crisis: The Experience of Poland |
| title_fullStr | Earnings Management amid the COVID-19 Financial Crisis: The Experience of Poland |
| title_full_unstemmed | Earnings Management amid the COVID-19 Financial Crisis: The Experience of Poland |
| title_short | Earnings Management amid the COVID-19 Financial Crisis: The Experience of Poland |
| title_sort | earnings management amid the covid 19 financial crisis the experience of poland |
| topic | financial crisis corporate finance earnings management sustainable accounting |
| url | https://gnpje.sgh.waw.pl/Earnings-Management-amid-the-COVID-19-Financial-Crisis-The-Experience-of-Poland,159032,0,2.html |
| work_keys_str_mv | AT joannalizinska earningsmanagementamidthecovid19financialcrisistheexperienceofpoland AT leszekczapiewski earningsmanagementamidthecovid19financialcrisistheexperienceofpoland |