Impact of Earning Management on Firms Value: Moderating Role of Political Stability and Corporate Governance Quality

Abstract

The aim of this study is to examine the impact of earning management on firm’s value. Moderating role of political stability and corporate governance quality in context of south Asian developing markets. Earning management accruals and real both used in this study. The dependent variable firm value measured by using the Tobin’s Q model, ROA. Data was collected for the non-financial listed firms of textile, sugar, food, chemicals, and energy sectors listed firms for south Asian developing markets. Data collected for the time period of 2013-2022. Major sources of data was Thomasson router, stock screener, FSA and BSA, annual financial reports etc. Study used diagnostic testing i.e. descriptive summary and correlation matrix etc. Study also used Pooled OLS regression and fixed effects model. Population of study consist on non-financial listed firms in South Asian markets. Sample size 400 listed firms are finalized by using stratified sampling technique. The firms from textile, sugar, food and chemical added form Asian developing markets. Findings of study indicates that sign of coefficient for accruals earning management (AEM) is negative and its probability is highly significant. In contrast, sign of coefficient for real earning management (REM) is negative and its probability is highly significant. The sign of coefficient for liquidity (LIQ) and firm size (FS) is negative and its probability is highly significant. The sign of coefficient for GDP is positive and its probability is highly significant. The sign of coefficient for inflation (INF) positive and its probability is highly significant. Moderating role of political stability is highly significant, similarly, the moderating role of CGQ is also significant. Study is limited to Asian developing market non-financial sectors by using secondary method. In future, study can be extendable by adding more items in CGQ measurements and other Independent variable across the least developing and financial sectors.