The impact of COVID-19 pandemic on earnings management and the value relevance of earnings: US evidence

Liu G., Sun J.

Managerial Auditing Journal, vol.37, no.7, pp.850-868, 2022 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 37 Issue: 7
  • Publication Date: 2022
  • Doi Number: 10.1108/maj-05-2021-3149
  • Journal Name: Managerial Auditing Journal
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, ABI/INFORM, Business Source Elite, Business Source Premier, INSPEC
  • Page Numbers: pp.850-868
  • Keywords: US, Earnings management, Value relevance, COVID-19 pandemic
  • TED University Affiliated: No


© 2022, Emerald Publishing Limited.Purpose: The purpose of this study is to examine whether the COVID-19 pandemic has affected earnings management and the value relevance of earnings in the USA. Design/methodology/approach: Discretionary accruals, the explanatory power and slope coefficient of earnings are compared between 2019 (prepandemic year) and 2020 (pandemic year). Univariate and regression analyses are performed. Findings: There was a significant decline in discretionary accruals from 2019 to 2020, suggesting that firms engaged in more income-decreasing earnings management to take a big bath in reporting earnings in the pandemic year. Meanwhile, the explanatory power and slope coefficient of earnings both were lower in 2020 than in 2019, consistent with the notion that the pandemic has impaired the value relevance of earnings. Originality/value: This study explores the consequences of the pandemic from accounting perspective. It also enriches accounting research on economic crises.