Effect of Accrual Earnings Management on Firm’s Performance: Evidence from Financial Firms in Pakistan

Abstract

This study investigates the relationship between accrual earnings management and financial performance in financial firms in Pakistan. This study has considered accrual earnings management as independent variable and return on assets, return on equity and earnings per share (representing financial performance) as dependent variables. However, financial firms of Pakistan have been the sector chosen to investigate the relationship between variables mentioned above. Historical data regarding these variables have been collected from the period of 2010 – 2019 (10 years) through secondary sources of data (annual financial statements). However, statistical tests (such as descriptive statistics, correlation and regression) have been used primarily to identify the relationship between variables of this study. Results have been drawn through statistical tests with the help of Stata software. Based on the findings, it has been proved that accruals earnings management has positive impact return on assets, return on equity and earnings per share of financial firms in Pakistan. Conclusively, this study has found out that accruals earnings management significantly impacts financial performance of financial firms in Pakistan.