Discretionary accruals, Financial Reporting Lag and the role of Managerial Ability: Evidence from a developing market

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Ahmed Diab, Arafat Hamdy


This study examines the impact of earnings management practices—as measured by companies' discretionary accruals (DACC) level—and managerial ability (MA), on the financial reporting lag. In addition, the study investigates the intermediary effect of executives’ managerial ability on the relationship between the discretionary accruals’ practices and the companies' financial reporting lag. This study used panel data for a sample of 114 firms listed on the Saudi stock exchange over 2011- 2019, which is analyzed using multiple regression.  We found a significant negative effect of MA on both the level of companies' discretionary accruals and financial reporting lag. In addition, we found a negative relationship between DACC and the financial reporting lag. However, we found a significant positive effect of DACC on financial reporting lag during the presence of MA. Our study highlights the importance of having managers with high abilities, especially in emerging markets with weak corporate governance mechanisms, to reduce the motivation for management opportunistic behavior, and help stakeholders detect earnings management practices.


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