The Moderating Role of Firm Characteristics on the Relationship between Financial Distress and Earnings Management : An Empirical Study / Monir Mohamed Monir ; Supervised Hala Abdelnaby Abdelfattah , Manal Abdelazim Mohamed

Thesis (M.Sc.) - Cairo University - Faculty of Commerce - Department of Accounting

The main objective of this study is to examine the moderating role of firm characteristics on the relationship between Financial Distress (FD) and Earnings Management (EM). In this research, a sample of 101 Egyptian firms listed in the Egyptian stock Exchange is used for a period of six years from 2014 to 2019. The ordinary least square (OLS) regression is applied for six multiple regression models to test the research hypotheses. Discretionary accruals estimated from modified Jones model (1995) is used to measure EM, Altman{u2019}s Z-score Emerging Markets Scoring model (EMS) is used to measure FD. The firm characteristics examined in this research are firm size, firm growth opportunities, financial leverage and profitabilityThe results revealed that there is a significant positive relationship between FD and EM. Moreover, it is found that there is a significant positive relationship between firm characteristics and EM. Additionally, there is a significant positive relationship between firm characteristics and FD. Finally, the results indicated that the firm size moderates the relationship between FD and EM, implying that firm size reduces the negative impact of Z-Score on EM. while firm growth opportunities, leverage and profitability don{u2019}t moderate the relationship between FD and EM. Thus, government, public investors, shareholders, banks, insurance companies and creditors should take into consideration firm size while assessing the relationship between FD and EM

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