Publication: Social capital and earnings management in small and medium firms
Authors
Sánchez Ballesta, Juan Pedro ; Yagüe, José
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Facultades, Departamentos, Servicios y Escuelas::Departamentos de la UMU::Organización de Empresas y Finanzas
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Publisher
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DOI
https://doi.org/10.1080/01559982.2021.1935107
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info:eu-repo/semantics/article
Description
©2021. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
This document is the Accepted version of a Published Work that appeared in final form in Accounting Forum. To access the final edited and published work see https://doi.org/10.1080/01559982.2021.1935107
Abstract
In this study we examine the association between social capital and
earnings management in small and medium firms (SMEs). Social
capital, i.e. the community’s norms and networks, may play a role
as an informal and external disciplining mechanism of managers
and, therefore, affect earnings management practises in small
and medium firms, less subject to formal internal and external
monitoring than larger firms. We implement a cross-region
analysis by using a sample of Spanish SMEs and employ three
measures that consider sociological and economic dimensions of
social capital: an index of social capital based on economic
relationships and proxies for trust and civic engagement. We find
a negative association between the proxies for social capital and
earnings management. Hence, our findings suggest that
managers of small and medium firms headquartered in regions of
higher social capital are less likely to manage reported earnings.
However, our findings also reveal that the relationship between
social capital and earnings management practises in private SMEs
depends on firm size.
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Citation
Accounting Forum
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