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Earnings Management in Recession and Recovery Periods

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  • Yousef Jahmani
  • Suman Niranjan
  • Susanne Toney

Abstract

This article investigates earnings management during the recession and recovery periods (2008 and 2013) for S&P 500 companies. Using the modified Jones model, the results suggest that these companies managed their earnings in both periods, but they managed their earnings much more in the recession period, which may be attributed to the desire to avoid or mitigate the negative consequences of experiencing deep losses. The results also raise questions about the reliability of the companies’ financial statements. The findings of this research are useful to the Securities and Exchange Commission and auditors, and they imply that more careful scrutinisation of companies’ financial statements is needed to better inform investors and creditors relying on these statements. JEL Classification: M41

Suggested Citation

  • Yousef Jahmani & Suman Niranjan & Susanne Toney, 2016. "Earnings Management in Recession and Recovery Periods," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 10(2), pages 264-280, May.
    • Handle: RePEc:sae:mareco:v:10:y:2016:i:2:p:264-280
    DOI: 10.1177/0973801015625274
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    References listed on IDEAS

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    More about this item

    Keywords

    Earnings Management; Discretionary Accruals; Economic Recession; Business Cycle;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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