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Sustainability measures and earnings management: evidence from Greek municipalities

Sandra Cohen (Department of Business Administration, Athens University of Economics and Business, Athens, Greece)
Ioanna Malkogianni (Department of Accounting and Finance, International Hellenic University, Kavala, Greece)

Journal of Public Budgeting, Accounting & Financial Management

ISSN: 1096-3367

Article publication date: 29 March 2021

Issue publication date: 19 July 2021




This study analyses the engagement of Greek municipalities in earnings management activities through the manipulation of their accrual accounts. It aims at identifying whether discretionary accruals are associated with certain financial sustainability measures calculated through financial statement numbers.


To test the hypotheses, the annual financial data of Greek municipalities for the period 2011–2018 are used. The final sample corresponds to an unbalanced panel data sample that includes 1,565 yearly observations. Total accruals and discretionary accruals modelling are based both on the aggregate Jones model and the modified Jones model.


The findings provide evidence that Greek municipalities engage in earnings management practices through the manipulation of accruals. Moreover, there is corroborative evidence that financial sustainability indicators, such as indebtedness, liquidity and efficiency ratios, are related to the magnitude of earnings management, while earnings management behaviour during the year preceding the municipal elections is more intense.


The paper expands the literature in earnings management in local governments by analysing the relation of financial sustainability indicators to this behaviour.



The authors would like to thank the participants of the EGPA PSG XII Spring Workshop in Valletta, Malta (2017), the 16th Annual Conference of Hellenic Finance and Accounting Association in Athens, Greece (2017) and the 42nd Annual Congress of the European Accounting Association in Paphos, Cyprus (2019) for their comments on earlier versions of the paper as well as the two anonymous reviewers for their insightful suggestions on the final version of the paper.

Funding: This research work was supported by a scholarship of the National Foundation of Greek Scholarships (IKY), program “Scholarships for the second cycle of postgraduate studies” with the resources of the OP “Human Resources Development, Education and Lifelong Learning”, 2014-2020 with the co-financing of the European Social Fund and the Greek Government.


Cohen, S. and Malkogianni, I. (2021), "Sustainability measures and earnings management: evidence from Greek municipalities", Journal of Public Budgeting, Accounting & Financial Management, Vol. 33 No. 4, pp. 365-386.



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