Earnings Management in Diversified & Non-Diversified Companies of Pakistan

DOI: 10.5176/2251-1997_AF18.121

Authors: Iftikhar Ahmad, Kashaf Tajammal, Sabahat Riaz

Abstract:

This paper makes an important contribution towards financial and accounting literature by providing significant evidence on the existence and extent of earnings management in relation to the corporate strategic choices practiced in companies of Pakistan. This study provides evidence that corporate diversification in Pakistan mitigates manipulation of earnings and companies operating under one industry exacerbates earnings management. It also provides evidence that the extent of earnings management differs between diversified and non- diversified companies’ due to heterogeneities in firm characteristics.

Keywords: Earnings Management, Corporate Diversification, Non-diversified firms