Authors: Maria Kyriakou, Augustinos Dimitras

Title: Earnings management in Eurozone

Abstract

Earnings management has been a subject of academic interest for over four decades. This study examines the relation between audit fees and earnings management (proxy of discretionary accruals) in Germany, France, Italy, Spain, and Netherlands and attempts to the relation between non-audit fees and earnings management in the crisis and out of the crisis periods for the same countries, finding statistically substantial results. Moreover, we examine the relationship between auditor tenure, auditor size and earnings management, finding important results as well. Finally, financial distress firms are related with earnings management regardless of being the change in GDP positive or negative. We also found that France is influenced the least by the financial crisis in comparison to the other four countries (Germany, Italy, Spain and Netherlands) that are examined in this study. These results are also robust, by OLS findings. Our results overall produce important policy implications for auditors, accountants and managers of firms for all these countries which are considered in this study.

Keywords: Earnings management, auditor size, audit fees, non-audit fees, auditor tenure, financial crisis