Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 12, 2023 erstellt
Description:
This article examines the relation between firm-level political risk (PRISK) and real earnings management (REM). Using a sample of U.S. firms from 2002 to 2019, we find that PRISK increases REM. This finding remains robust to using alternative measures of PRISK, alternative regression models, and several techniques to alleviate endogeneity concerns. We also use the significant election loss by the Democratic Party in the 2010 midterm elections as an exogenous shock to the political environment. In additional tests, we find that the positive PRISK–REM relation is more pronounced in the presence of transient investors, non-industry-specialist auditors, and early-career CEOs. Overall, our findings suggest that PRISK has implications for REM