Journal of Accounting and Finance in Emerging Economies (Mar 2020)

The Moderating Effect of OPEC and Non-OPEC on the Relationship Between Oil Price Volatility and Accrual Earnings Management in the Oil and Gas Industry

  • Jalila Binti Johari,
  • Viveksarati Sandrasigaran,
  • Soh Wei Ni,
  • Bany-Ariffin A.N

DOI
https://doi.org/10.26710/jafee.v6i1.1082
Journal volume & issue
Vol. 6, no. 1

Abstract

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Objective: This study is an empirical examination on the relationship between oil price volatility and earnings management in the oil and gas industry, moderated by dominant-firm, OPEC (Organization of Petroleum Exporting Nations), and fringe competition of Non-OPEC countries. This study tests current and non-current accruals as the proxy of accrual earnings management. Methodology: A total sample of 209 firm-year observations from 2008 to 2018 of listed oil and gas firm collected from the Thomson Datastream database. To proxy the moderation effect, the samples divided into two sub-groups, OPEC and Non-OPEC. Results: The initial results show that, overall, the interaction effect between OPEC/Non-OPEC and oil price volatility is significant to discretionary and income-decreasing discretionary accrual. Implication: This study contributes to existing earnings management literature regarding political cost, which remains a significant concern to oil and gas companies worldwide.

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