MITIGATING EARNINGS MANAGEMENT IN TIMES OF ECONOMIC UNCERTAINTY: THE IMPACT OF ANALYSTS' COVERAGE

Puxuan Wang, Business School, University of Sydney, Australia
John Downs, College of Business, Lander University, Greenwood, USA
Maggie Foley, Davis College of Business and Technology, Jacksonville University, U.S.A.
Juan Chang, Accounting College, Tianjin University of Commerce, Tianjin, China
Published in

 JOURNAL OF ACADEMY OF BUSINESS AND ECONOMICS
Volume 23, Issue 4, p35-47, December 2023

ABSTRACT

This study investigates the interplay between analysts' coverage, environmental uncertainty, and earnings management, including accrual management and real earnings management. It focuses on stocks traded on the Shanghai and Shenzhen Stock Exchanges (A-shares) in China between 2010 and 2018. The research reveals a positive relationship between elevated environmental uncertainty and increased levels of earnings management, particularly in the field of real earnings management. Importantly, analysts' coverage emerges as a potent external oversight mechanism, effectively curbing the extent of earnings manipulation, particularly in real earnings management activities. Moreover, analysts' coverage serves to dampen the impact of environmental uncertainty on earnings management, particularly within the realm of real earnings management.

Keywords

Economic Uncertainty; Analysts’ Coverage; Accrual Management; Real Earnings Management


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