Earnings Management During the Oil Price Crisis

Bugshan, A., Lafferty, G., Bakry, W., Li, Y. 2020. Earnings Management During the oil Price Crisis. Journal of Applied Economic Sciences, Volume XV, Summer, 2(68): 297-309. DOI: 10.14505/jaes.v15.2(68).04

36 Pages Posted: 11 May 2020 Last revised: 27 Jul 2020

See all articles by Abdullah Salem Bugshan

Abdullah Salem Bugshan

Western Sydney University

George Lafferty

Western Sydney University

Walid Bakry

Western Sydney University

Yongqing Li

Western Sydney University

Date Written: June 14, 2018

Abstract

Starting in mid-2014, oil prices began to fall drastically, hereafter this is referred to as the oil price crisis. This paper investigates the impacts of this crisis on earnings management behaviour in Gulf Cooperation Council (GCC) countries. Earnings management is measured in terms of accrual based earning management (AEM) and real activity based earnings management (REM). The modified Jones model is adopted to estimate AEM, and three models from Roychowdhury (2006) are used to estimate REM. The results reveal that companies have tended to use downward REM during the oil price crisis, engaging less with AEM. Control variables covering firm characteristics, including ROA, leverage, growth and OCF exhibit significant relationships with EM. The present study examines EM during the oil price crisis, considering both accrual and real activity earnings management. In contrast to most previous research in this domain which has only considered upward REM, a non-directional approach is used herein whereby the absolute (unsigned) term is applied to capture this metric.

Keywords: Earnings management, Discretionary accruals, Real earnings management, Gulf Cooperation Council.

JEL Classification: C58, G30, G39, M41

Suggested Citation

Bugshan, Abdullah Salem and Lafferty, George and Bakry, Walid and Li, Yongqing, Earnings Management During the Oil Price Crisis (June 14, 2018). Bugshan, A., Lafferty, G., Bakry, W., Li, Y. 2020. Earnings Management During the oil Price Crisis. Journal of Applied Economic Sciences, Volume XV, Summer, 2(68): 297-309. DOI: 10.14505/jaes.v15.2(68).04 , Available at SSRN: https://ssrn.com/abstract=3591048

Abdullah Salem Bugshan

Western Sydney University ( email )

169 Macquarie st
Sydney, NSW 2150
Australia

George Lafferty

Western Sydney University ( email )

Sydney
1 Parramatta Square, 169 Macquarie Street, Parrama
Sydney, 2751
Australia

Walid Bakry (Contact Author)

Western Sydney University ( email )

Sydney
1 Parramatta Square, 169 Macquarie Street, Parrama
Sydney, 2751
Australia
2 9685 9372 (Phone)

Yongqing Li

Western Sydney University ( email )

Sydney
1 Parramatta Square, 169 Macquarie Street, Parrama
Sydney, 2751
Australia

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