The impact of COVID-19 on earnings management: an international investigation

This study examines the impact of severe COVID-19 outbreaks on corporate earnings management behaviour in a sample of 38,046 firm-quarter observations from 46 countries for the period of 2020Q1–2020Q4. Given that economic crises significantly affect corporate earnings management behaviour, and that real earnings management is preferable because it is less subject to external monitoring and scrutiny, we hypothesize that firms in countries with more severe COVID-19 outbreaks are more likely to manage earnings through real earnings management than firms in countries with less severe COVID-19 outbreaks. We find a positive association between the severity of COVID-19 and real earnings management in the firms included in this study.