Impacts of Results Management on Political Instability: Evidence in Brazilian Companies

Abstract

Many studies for developed markets have concluded that companies report gains inflated by accruals (manipulation of gains through the exploitation of accounting criteria) or real activities. Such practices appear to be especially significant around important political events. This study aims to verify the influence of earnings management, through discretionary accruals, on the abnormal return on financial assets of companies listed on the B3 in a period of political instability (impeachment). Parametric and non-parametric tests were used in the 2014-2018 period. To verify if earnings management tends to increase profit more intensely in the first year prior to the event (H1b), the T test does not confirm whether this management occurs before or after instability (H1a), but it points to earnings management with a downward trend in the year of impeachment. When applying panel data, it is not made clear whether companies involved in earnings management in periods of political instability have abnormally poor returns (H2).The results show that political instability was quickly understood by the financial market in order to practically cancel the informational asymmetry that could generate high levels of management.

Keywords

• gerenciamento de resultados
• instabilidades políticas
• impeachment