Abstract
The study was conducted to evaluate the impact of firm size on earnings management for the textile sector of Pakistan. For this purpose annual ten years data was obtained from 2004 to 2013 for fifty selected firms from the textile sector of Pakistan. Natural logarithm of total assets was used as the proxy of firm size. On the other hand earning management was the dependent variable of this study. Earnings management was measured through discretionary accruals by using modified Jones model. Descriptive statistics, correlation and panel data analysis was used for capturing the impact of firm size on earnings management. The statistical results of this study revealed that there is positive and significant impact of firm size on earnings management.
Highlights
Different views exist regarding the relationship of earning management with firm size
The results of this study revealed that the firms having the female chief financial officer show the decreasing discretionary accruals value; because female CFO’s adopt more conservative financial reporting strategies
∆CLt it denoted to the fluctuation in current liabilities in current year ∆DCLt it indicates the change in the amount of debt included in the current liabilities in current year ∆DEPt is the expense of depreciation and amortization in current year (2) Cash Flow Statement Approach
Summary
Different views exist regarding the relationship of earning management with firm size. Kim et al (2003) studied to check the association between earning management and firm size He got the 18 years data of large, medium and small firms. The results of the study were obtained by applying the regression analysis which showed that the companies whether they are small or large in size manage their returns to hide their losses or to show the positive trend in their earnings. The study concluded that firms having the more debt in their capital structure perform more practices to manage their earning due to the strong positive relation of both variables. Kim et al (2003) identified the relationship of earning management with size of firm They selected sampled firms from the companies whose financial statements were available on the commutate data base from 1983 to 2000. H1 There is significant relationship between firm size and earning management
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