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Original Research

THE TRADE-OFF BETWEEN ACCRUALS AND REAL ACTIVITIES EARNINGS MANAGEMENT IN JORDAN

MOHAMMED IDRIS 1, ABDELRAHIM NASSOURA 2, and MARIAM AMMAR 3.

Vol 17, No 12 ( 2022 )   |  DOI: 10.5281/zenodo.7441941   |   Author Affiliation: Accounting Department, Applied Science Private University, Amman, Jordan 1; Accounting Department, Aldar University College, Ajman, United Arab Emirates 2; Accounting Department, Gharyan University, Gharyan, Libya 3.   |   Licensing: CC 4.0   |   Pg no: 664-672   |   To cite: MOHAMMED IDRIS, et al., (2022). THE TRADE-OFF BETWEEN ACCRUALS AND REAL ACTIVITIES EARNINGS MANAGEMENT IN JORDAN. 17(12), 664–672. https://doi.org/10.5281/zenodo.7441941   |   Published on: 15-12-2022

Abstract

This research examines the trade-off between accruals and real activities earnings management using a sample of manufacturing firms listed on Amman Stock Exchange between 2017 and 2021 the findings obtained from the recursive model show a positive relationship between unexpected levels of real earnings manipulations and abnormal accruals. This suggests that managers in Jordan use both types of earnings management simultaneously to arrive at target levels of earnings, which is unlike the US where there is evidence consistent with the trade-off between accruals and real activities earnings management. Further, the results suggest that managers of Jordanian firms manipulate earnings using both types of earnings management regardless of the scrutiny from controlling shareholders.


Keywords

earnings management, abnormal accruals, abnormal production costs, abnormal discretionary expenses, trade-off