Detecting earning management in financial crisis: empirical evidence of three boycotted companies in Morocco

Abstract

Do companies facing a crisis such as the Boycott manage their results in the first year of the crisis? This study focused on the three companies that were the target of the Boycott campaign, which had marked Morocco on April 20, 2018. We interpellated two empirical models, a stationary model of DeAngelo (1986) and a modified Jones economic model (1995), to perform, on a longitudinal basis composed of a sample of 30 year/firm observations, an empirical test of the main research hypothesis. Adopting this quantitative approach, the management of accounting results is effective in the first year of the crisis through downward adjustments. Nevertheless, the study sample was composed of three firms in a boycott crisis, indicating a good representativeness of the results given the limited number of observations (30 firm-year observations). The theoretical framework includes political-contractual theory, governance theory and accounting threshold theory. Agency relations, political costs, governance mechanisms and accounting thresholds were mobilized to formulate hypotheses regarding the discretionary components of earnings management during a boycott crisis. The testing of these hypotheses is put in perspective with other research on accounting earnings management in a crisis context.

Keywords: Earning management, Accruals, Boycott

Classification JEL : M20, M40

Type de l’article : Empirical research