Earnings Management in European Firms Around COVID-19

Sammanfattning

This study examines whether accrual-based earnings management, proxied by absolute discretionary accruals, differed among listed firms in the European Union before, during and after the COVID-19 shock. Previous studies provide mixed evidence on how discretionary reporting changes in response to major external shocks, with limited documentation from a broader European setting. With a sample including 12,423 firm-year observations throughout the 27 European Union member states for the 2017-2022 period, discretionary accruals are estimated using the Modified Jones model. The results indicate significantly higher levels of earnings management in the post-COVID period compared to during the 2020 pandemic period, while no statistically significant difference is found between the pre-pandemic period and the period during COVID-19. The study contributes to the earnings management literature by providing evidence from a broad European environment and suggesting that reporting incentives differ between periods of crisis and recovery.