The Moderating Role of Earnings Management on the Relationship between Cash Flow Activities and Stock Returns in the Jordanian Manufacturing Firms

Abstract

Purpose: This study examined the moderating role of earnings management on the relationship between cash flow activities and stock returns among the Jordanian manufacturing firms. Methodology: Data was collected from 44 companies listed in Amman Stock Exchange for the period 2013-2018. The obtained data was subsequently analyzed using descriptive and multiple linear regression analysis tools of SPSS, version 27. Findings: This study observed that earnings management, computed as per the modified Jones model of 1995, among the manufacturing firms in Jordan produce no significant influence on the relationship between stock returns and the cash flow activities. Moreover, there was no significant association between cash flow activities and the firms’ stock returns. Practical implications: The findings from this study give the management of manufacturing firms more freedom to independently list their stock. Originality: This paper highlights a pragmatic dissonance between earnings management and cash flow activities and stock returns as demonstrated by the data obtained from the manufacturing firms listed in Amman stock exchange for the period 2013-2018.