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Is there a trade-off between accrual-based and real earnings management activities in the presence of (fe) male auditors?

Is there a trade-off between accrual-based and real earnings management activities in the presence of (fe) male auditors?
Is there a trade-off between accrual-based and real earnings management activities in the presence of (fe) male auditors?
Prior research suggests that the presence of high quality auditors (i.e. proxied by audit firm characteristics) constrains accrual-based earnings management, but it inadvertently leads to higher real activities manipulation. We investigate whether such trade-off exists between accrual-based and real earnings management activities in the presence of female or male auditors. We use a sample of UK firms for the period 2009 to 2016 and find that firms audited by female auditors do not resort to a higher level real activities manipulation when their ability to engage in accruals management is constrained. Overall, our results suggest that the benefits of hiring female auditors (i.e. less accrual-based earnings management) are overwhelmingly higher than the costs they might bring to the client firms (i.e. higher real activities manipulation).
Abnormal accruals, Auditor gender, Real activities
0167-4544
Owusu, Andrews
0a243b8a-d46f-4123-a879-c10df457bc7e
Zalata, Alaa Mansour
0fc2c56d-97ad-44ce-ab31-63ca335dcef6
Omoteso, Kamil
28dd2c05-6817-4214-911f-10ff29447011
Elamer, Ahmed A.
41f0a000-ef97-4e6b-b741-d755def01823
Owusu, Andrews
0a243b8a-d46f-4123-a879-c10df457bc7e
Zalata, Alaa Mansour
0fc2c56d-97ad-44ce-ab31-63ca335dcef6
Omoteso, Kamil
28dd2c05-6817-4214-911f-10ff29447011
Elamer, Ahmed A.
41f0a000-ef97-4e6b-b741-d755def01823

Owusu, Andrews, Zalata, Alaa Mansour, Omoteso, Kamil and Elamer, Ahmed A. (2020) Is there a trade-off between accrual-based and real earnings management activities in the presence of (fe) male auditors? Journal of Business Ethics. (doi:10.1007/s10551-020-04672-5).

Record type: Article

Abstract

Prior research suggests that the presence of high quality auditors (i.e. proxied by audit firm characteristics) constrains accrual-based earnings management, but it inadvertently leads to higher real activities manipulation. We investigate whether such trade-off exists between accrual-based and real earnings management activities in the presence of female or male auditors. We use a sample of UK firms for the period 2009 to 2016 and find that firms audited by female auditors do not resort to a higher level real activities manipulation when their ability to engage in accruals management is constrained. Overall, our results suggest that the benefits of hiring female auditors (i.e. less accrual-based earnings management) are overwhelmingly higher than the costs they might bring to the client firms (i.e. higher real activities manipulation).

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Accepted/In Press date: 1 November 2020
e-pub ahead of print date: 13 November 2020
Keywords: Abnormal accruals, Auditor gender, Real activities

Identifiers

Local EPrints ID: 446249
URI: http://eprints.soton.ac.uk/id/eprint/446249
ISSN: 0167-4544
PURE UUID: ccc73116-260b-48e1-8d39-c985740e54f0
ORCID for Alaa Mansour Zalata: ORCID iD orcid.org/0000-0003-2018-4313

Catalogue record

Date deposited: 01 Feb 2021 17:31
Last modified: 26 Nov 2021 06:17

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Contributors

Author: Andrews Owusu
Author: Kamil Omoteso
Author: Ahmed A. Elamer

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