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Growth opportunities and earnings management

Fouad AlNajjar, Ahmed Riahi‐Belkaoui

Managerial Finance

ISSN: 0307-4358

Article publication date: 1 December 2001

2459

Abstract

Uses previous research on firms’ potential investment (i.e. growth) opportunities, profitability and political cost/risk to suggest that a high level of growth opportunities may encourage managers to use income reducing accruals. Tests this on 1987‐1990 data from a sample of US multinationals classified into high or low growth groups. Explains the methods used to estimate discretionary accruals and to measure the investment opportunity set. Presents the results which suggest that discretionary accruals are higher in high growth firms; and support the political cost hypothesis of Watts and Zimmerman (1978) and the political risk hypothesis of Monti‐Belkaoui et al (1999)

Keywords

Citation

AlNajjar, F. and Riahi‐Belkaoui, A. (2001), "Growth opportunities and earnings management", Managerial Finance, Vol. 27 No. 12, pp. 72-81. https://doi.org/10.1108/03074350110767457

Publisher

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MCB UP Ltd

Copyright © 2001, MCB UP Limited

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