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The trilogy of economic policy uncertainty, earnings management and firm performance: empirical evidence from France

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Abstract

This paper investigates the effect of earnings management practices on firm performance and focuses on how economic policy uncertainty (EPU) moderates the association between earnings management and firm performance. The analysis is based on a sample of French listed companies on the CAC ALL tradable index for the period from 2010 to 2017. Our results show that earnings management is positively associated with firm performance. This finding suggests that accrual- based earnings management, real earnings management and classification shifting are beneficial when managers use accounting choices to reduce agency costs and create value for shareholders. We also find that high EPU triggers a credible signal of lower disclosure quality. It plays an important role in promoting the opportunistic use of earnings management, which harms firm performance. This study is interesting for potential investors, since it underlines the negative effect of managerial opportunistic behaviour on firm performance under policy uncertainty.

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Availability data statement

The datasets generated and analysed during the current study are not publicly available but are available from the corresponding author on reasonable request.

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Authors and Affiliations

  1. Higher Institute of Management, Sousse University, Rue Abdlaaziz El-Behi, C.P. 4000, Sousse, Tunisia

    Ines Kahloul & Khawla Hlel

  2. Faculty of Business, Athabasca University, 13220 St-Albert Trail NW #201, Edmonton, AB, T5L 4W1, Canada

    Jocelyn Grira

Authors
  1. Ines Kahloul
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  2. Jocelyn Grira
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  3. Khawla Hlel
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Correspondence to Jocelyn Grira.

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All authors have participated in conception and design, analysis and interpretation of the data, drafting the article or revising it critically for important intellectual content; and approval of the final version. This manuscript has not been submitted to, nor is under review at, another journal or other publishing venue. The authors have no affiliation with any organization with a direct or indirect financial interest in the subject matter discussed in the manuscript.

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Appendix

Appendix

Table 6 Definitions of variables
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Kahloul, I., Grira, J. & Hlel, K. The trilogy of economic policy uncertainty, earnings management and firm performance: empirical evidence from France. J Econ Finan 47, 184–206 (2023). https://doi.org/10.1007/s12197-022-09605-8

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