Abstract
The objective of this research is to investigate how adherence to anti-money laundering (AML) regulations affects the utilisation of accrual-based earnings management (AEM) and real earnings management (REM) strategies in the Middle East and North Africa (MENA) region. This study uses the System Generalized Method of Moment method to control for endogeneity due to omitted variables of 430 firms (4300 firm-year observations) from 2012 to 2021. The findings indicate that adhering to AML regulations results in a decrease in both aggressive AEM and REM. Our findings suggest a potential relationship between AML regulations and reduced earnings management, which warrants further investigation. By emphasising the importance of identifying accounting red flags and promoting greater transparency and accountability, our study supports a more radical perspective on the fight against corruption and money laundering.
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