Abstract
This study aimed at assessing the impact earnings management has on corporate performance of firms on the Ghana Stock Exchange. The study used discretionary accruals of the modified jones model, abnormal cashflow from operations, abnormal discretionary expenses and abnormal production cost to measure earnings management whiles corporate performance was measured using return on assets. The study used a sample of 14 listed companies on the Ghana Stock Exchange (GSE) for the period of 2008 to 2018. We applied multiple linear regression for hypothesis testing. The findings of the study indicate that firm listed on the GSE engages earnings management and manages earnings upwards. Our results indicate earnings management through both accrual earnings and real earnings management techniques have a significant positive effect on corporate performance. Therefore, we recommend an intensive evaluation by the users of financial statements to make competent decisions. Keywords : Accrual Earnings Management, Real Earnings Management, Discretionary Accruals, Corporate Performance DOI: 10.7176/RJFA/11-10-01 Publication date: May 31 st 2020
Highlights
Earnings intuitively called net profit or net income is a single valuable item presented in a firm’s income statement
This study explores the relationship between earnings management practices and corporate performance measured by Return on Assets (ROA)
3.1 Sample selection and data collection This study focuses on examining the relationship between earnings management and firm performance in non-financial firms listed on the Ghana stock exchange
Summary
Earnings intuitively called net profit or net income is a single valuable item presented in a firm’s income statement. Firms keep an attractive value to attract the public as indicated by Tabassum, (2015) that prospective investors and corporations are attracted by the positive earnings status of firms that leads to the rise in stock prices. Managers attempt to yield prospective and influential earnings goals by using strategies and techniques through the provided generally accepted accounting principles (GAAP) to alter reported earnings. This phenomenal attempt or act is referred to as earnings management
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