Elections and Discretionary Accruals: Evidence from 2004

51 Pages Posted: 1 Apr 2008 Last revised: 1 Jan 2010

See all articles by Karthik Ramanna

Karthik Ramanna

University of Oxford - Blavatnik School of Government

Sugata Roychowdhury

Boston College

Date Written: December 15, 2009


We examine the accrual choices of outsourcing firms with links to US congressional candidates during the 2004 elections, when corporate outsourcing was a major campaign issue. We find that politically-connected firms with more extensive outsourcing activities have more income-decreasing discretionary accruals. Further, relative to adjacent periods, the evidence is concentrated in the two calendar quarters immediately preceding the 2004 election, consistent with heightened incentives for firms to manage earnings during the election season. The incentives can be attributed to donor firms' concerns about the potentially negative consequences of scrutiny over outsourcing for themselves and for their affiliated candidates.

Keywords: accounting information, accruals management, campaign contributions, discretionary accruals, earnings management, election outcomes, political currency, political economy, political process

JEL Classification: D72, M41, M43, M44, M49, P16

Suggested Citation

Ramanna, Karthik and Roychowdhury, Sugata, Elections and Discretionary Accruals: Evidence from 2004 (December 15, 2009). Journal of Accounting Research, Forthcoming, Harvard Business School Accounting & Management Unit Working Paper No. 09-103, Available at SSRN: https://ssrn.com/abstract=1114925

Karthik Ramanna

University of Oxford - Blavatnik School of Government ( email )

Radcliffe Observatory Quarter
Oxford, Oxfordshire OX2 6GG
United Kingdom

Sugata Roychowdhury (Contact Author)

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States
617-552-1764 (Phone)

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