Earnings Management and COVID-19 Disclosure: The Role of Internal and External Monitoring Mechanisms

• In Event: ACCOUNTING: Financial Statements Disclosure

Abstract

We examine the association between earnings management and COVID-19 disclosure from 2020-2021. We find that higher earnings management is associated with lower COVID-19 disclosures; and this association is more pronounced for firms with larger analysts following. However, we find that the negative association between earnings management and COVID-19 disclosure is attenuated for firms with higher audit quality. Overall, our findings underscore the crucial importance of external auditors in maintaining corporate transparency in times of crisis. Our results also imply that some firms may feel compelled to meet analyst forecasts through earnings management over comprehensive risk disclosure during challenging circumstances.

Authors

• Hend Monjed, Qatar University

• Nader Mahmoud Ali Elsayed, Qatar University

• Hany Kamel, Qatar University