Abstract:
This study investigates the accounting decisions made by
managers of German public companies during the financial crisis of
2008. The overall goal was to detect the usage of earnings
management strategies. The list of incentives for earnings
management during the financial crisis was elaborated, among which
were income-increasing as well as income-decreasing and smoothing
strategies.
The earnings management was detected in the event year (2008 or 2009
depending on the industry) and the year preceding the crisis.
Big-bath accounting was the most preferable earnings management
strategy in a year -1. For the year 0 mixed evidence was gathered.
Discretional accruals turned out to be different within the same
industry (except Automobile). Asset quality index, gross margin
index and industry belonging was proved to have a positive
correlation with the probability of earnings manipulation.