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Growing Science » Decision Science Letters » Does the covid-19 pandemic create an incentive for firms to manage earnings? The role of board independence and corporate social responsibility

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Decision Science Letters

ISSN 1929-5812 (Online) - ISSN 1929-5804 (Print)
Quarterly Publication
Volume 13 Issue 1 pp. 99-110 , 2024

Does the covid-19 pandemic create an incentive for firms to manage earnings? The role of board independence and corporate social responsibility Pages 99-110 Right click to download the paper Download PDF

Authors: Mohammad Azzam, Eman Abu-Shamleh

DOI: 10.5267/j.dsl.2023.11.005

Keywords: Covid-19, Earnings Management, Corporate Social Responsibility, Board Independence, Amman Stock Exchange

Abstract: It is argued that managers took advantage of Covid-19 pandemic lockdowns and remote auditing and used earnings management (EM) practices extensively. Furthermore, the Covid-19 pandemic created new unsearched crisis-related incentives. This study, therefore, tests whether Covid-19 created a new incentive for managers to manipulate earnings. It also examines the association between corporate social responsibility (CSR) and board independence and EM during Covid-19. A data set of 384 firm-year observations from 2018 to 2021 of non-financial firms listed on the Amman Stock Exchange (ASE) was investigated. Results indicate that Jordanian firms engaged in EM during Covid-19 considerably more than when compared to pre-Covid-19, suggesting that Covid-19 created a new incentive for managers to manipulate earnings. Furthermore, Jordanian firms used income-increasing EM much more when compared to income-decreasing EM. However, when taking Covid-19 into account, no significant association was found between board independence and EM. In addition, the ability of CSR to constrain EM decreased. This adds to the current debate in the literature that even well-established monitoring mechanisms like board independence and CSR are unable to constrain EM practices in a unique business environment caused by Covid-19.

How to cite this paper
Azzam, M & Abu-Shamleh, E. (2024). Does the covid-19 pandemic create an incentive for firms to manage earnings? The role of board independence and corporate social responsibility.Decision Science Letters , 13(1), 99-110.

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Journal: Decision Science Letters | Year: 2024 | Volume: 13 | Issue: 1 | Views: 1758 | Reviews: 0

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