Do Firm Specific Characteristics Influence Earnings Management? Contemporary Evidence from Indian Economy Debnath Pranesh*, Roy Chinmoy** *Assistant Registrar, Finance Branch, Tripura University, Suryamaninagar, Tripura, India. praneshdebnath@gmail.com **Professor, Department of Commerce, Tripura University, Suryamaninagar, Tripura, India Online published on 15 June, 2017. Abstract The appealing rise of using discretionary accruals in the current practices of financial reporting upsurges considerable debates and disagreement between the over generalization of earnings management and the opportunistic use of non-patterned accruals, which very often underestimates the structurally existing variation between enterprises and calls for an urgent attention on optimistic adaptation for survival with reference to the firm specific characteristics. To assess the financial reporting transparency and to regain confidence in the content of financial statement, the present study intends to explore the impact of firm specific characteristics over the earnings management practices in external financial reporting of 234 firm-year observations which encompasses 26 Indian manufacturing firms in three separate sector covering a period of nine years from March, 2007 to March, 2015. With the help of calculated Discretionary Accruals (DA) ensuing (DeAngelo, 1986) model, this study tied up DA as a predicted variable being a proxy of earnings management and firm specific characteristics namely, firm's size, age, leverage, profitability, and growth are as explanatory variables. To evaluate the impact of the criterions and to draw the conclusion, descriptive statistics, VIF, pair wise correlation and multiple regressions were used through Stata software. Findings clearly signalled that while firm size and firm's leverage represented a significant negative impact on earnings management on the one hand; firm's age, profitability and growth were found to have exercised positive influence over the discretionary accruals during the study period for all the selected firms on the other hand. Finally, the study confirmed that large firms with high leverage tend to have lower incentive of earnings management but profitable firm with prolonged existence and higher growth opportunity inclined to involve more in earnings management practices. Top Keywords Earnings Management, Discretionary Accruals, Financial Reporting, Firm's Specific Characteristics, ET-500 Listed Companies. Top |