Accrual accounting earnings around zero in Greek municipalities: the relevance of political factors Sandra Cohen

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Uploaded by Sandra Cohen     Uploaded date: September 02, 2021    
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Publication date
September 01, 2021
Paper language
Abstract
This paper provides empirical evidence that Greek municipalities report small surpluses or zero earnings and that there is a statistically significant political effect related to this attitude. The analysis is based on the annual financial data of Greek municipalities for the period 2011-2017. The final sample includes 1417 annual observations. Based on the public choice theory, it is attempted to associate earnings management behaviour with political incentives and to uncover possible reasons that may induce it. By using the method of bootstrap kernel density estimation (bKDE) the hypothesis that municipalities tend to report earnings close to zero is supported. The findings suggest that core political factors, such as the oppositions strength and the mayors re-election, exert an effect on the appearance of discontinuities around zero reported earnings, contributing to the knowledge regarding earnings management. Sensitivity analysis confirms this political effect.
Keywords
bootstrap kernel density estimation; earnings management; Greek municipalities; opposition; re-elected mayors.
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Category
Financial accounting
Type of Paper
Published paper

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