Is Earnings Management Affected by Human Development and Economic Freedom?

Abstract

Based on the idea that insiders (i.e., managers and controlling shareholders) engage in earnings management to mask their diversion and rent seeking activities from outsiders, this paper presents international evidence supporting both a “diversion hypothesis” where earnings management is decreasing in economic freedom, and a “penalty hypothesis” where earnings management is increasing in human development.

Citation

Riahi‐Belkaoui, A. (2004), "Is Earnings Management Affected by Human Development and Economic Freedom?", Review of Accounting and Finance, Vol. 3 No. 1, pp. 115-127. https://doi.org/10.1108/eb043398