Global Journal of Accounting, Economics and Finance

Commentary - Global Journal of Accounting, Economics and Finance ( 2022) Volume 5, Issue 3

Earnings management's effects on the stock market

C Halim*
Department of Economics & Management, Fluminense Federal University, Hangzhou, Indonesia
*Corresponding Author:
C Halim, Department of Economics & Management, Fluminense Federal University, Hangzhou, Indonesia, Email:

Received: 15-Nov-2022, Manuscript No. GJAEF-23-86755; Editor assigned: 18-Nov-2022, Pre QC No. GJAEF-23-86755 (PQ); Reviewed: 02-Dec-2022, QC No. GJAEF-23-86755; Revised: 08-Dec-2022, Manuscript No. GJAEF-23-86755(R); Published: 16-Dec-2022, DOI: 10.15651/2504-9992.22.5.115


The evaluation of profit management is a crucial topic for stockholders and investors alike. Investors assess a company's effectiveness on the stock market depending on the measuring model they have chosen. Our research seeks to compare and contrast four strategies for gauging revenue management in this series. The Tunisian stock market's information accessibility predicts managers' actions and divided the parameter's "discretionary accruals" into higher and lower levels and looked at how it affected results. The outcomes show considerable coefficient accruals for the two degrees of discretion (according to the four models). For investors and financiers, managing earnings is a crucial concern. Selecting a model for assessing the management of earnings is necessary for investors to evaluate a company's performance (firm performance and stock returns on investment on the financial market). In order to predict managers' behaviors, research attempts to provide and compare four earnings management measurement methodologies in terms of the Tunisian stock market's informative substance. Though the issues of researchers typically mention manipulation, there aren't many studies conducted in Tunisia to look into the relationship between accounting, returns, and manipulation. However, a lot of US studies have focused on research funding management as a topic or context. The lack of empirical studies examining how profits operations affect stock prices in the Tunisian environment served as the impetus for our investigation.

The reason for this is partly attributable to the nation's stringent financial and accounting regulations, which forbid frequent changes in account types and require fiscal communication content to abide by a set of rules, particularly when it comes to revealing earnings appears to encourage a change in how profit-making activities are conducted. Yield management entails influencing a company's profitability in order to achieve specific objectives. The manager will use income smoothing if this goal is driven by a desire for more consistent income. Opportunities for income smoothing reduce risk and boost a company's market value. The requirement to maintain a specific level of accounting treatment owing to obligations and the need to sustain and grow revenues are two more reasons for revenue management. It entails pressure to surpass analyst goals. The opportunity to make accounting choices that alter the amount of revenue reported in the financial statements may be used in revenue management. The timing of transactions and the assumptions employed in financial reporting can be impacted by accounting decisions, which can have an impact on profitability. For instance, organisations that use the last-in, first-out strategy to their inventory may invest in purchases to decrease their net income during periods of rising prices. Similarly, a relatively modest change in bad debt estimates can have a significant impact on net income. Due to the intricacy of accounting regulations, it might be challenging for individual investors to understand revenue management, although accounting researchers have proposed numerous strategies. For instance, research demonstrates that organisations are more prone to engage in revenue management if they have bigger reserves and weaker governance systems. Recent studies have revealed that linguistics-based techniques can be used to detect financial manipulation. For instance, a 2012 study discovered that it was connected to the language executives used in payroll meetings.