Debt as a motivation for earnings management by Portuguese municipalities?

Abstract

This article examines whether politicians are motivated to engage in earnings management due to debt and if they use discretionary accruals in doing so. This knowledge could help prevent future misconduct by politicians and encourage regulatory bodies to reduce discretion in accounting standards. This study used quantitative methods: for example graphical analysis and regression models, including probit and panel data analysis. The results indicate that Portuguese municipalities have used discretionary accruals to engage in earnings management. However, the data suggests that earnings management was not motivated by debt.