Title: The influence of foreign currency earnings and foreign capital on earnings management

Authors: Kameshwar Rao V.S. Modekurti; K. Lubza Nihar

Addresses: Xavier Institute of Management and Research, St. Xavier's College Campus, 5, Mahapalika Marg, Mumbai, Maharashtra, 400001, India ' GITAM School of International Business, Gandhi Institute of Technology and Management, Visakhapatnam, Andhra Pradesh, 530045, India

Abstract: Earnings management offers scope for research due to the variety of accentuating contexts. This paper examines it in the contexts of foreign currency earnings, and foreign capital. 'Does the presence of foreign capital influence earnings management?' and 'Does the presence of foreign currency earnings influence earnings management?' are the research questions answered in this paper, taking the sample of NSE 200 companies of India, for the period 2010-2016. Evidence in this paper supports positive (negative) influence of foreign currency earnings (foreign capital), on earnings management. Results remain robust even when different measures of managed earnings, foreign earnings, and foreign capital are adopted, and also when controlled for firm level factors such as size, level of operations, and industry affiliation. This paper contributes to the meagre international literature on the theme 'international orientation and earnings management' and is the first empirical evidence on this theme from a significant emerging economy, India.

Keywords: earnings management; foreign capital; foreign earnings; earnings volatility; American depository receipts; ADR; FDI; foreign institutional investors; FIIs; foreign debt; discretionary accruals; international finance; information asymmetry.

DOI: 10.1504/AAJFA.2021.115666

Afro-Asian Journal of Finance and Accounting, 2021 Vol.11 No.3, pp.353 - 375

Received: 14 Dec 2017
Accepted: 27 Oct 2018
Published online: 16 Jun 2021 *

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