THE IMPACT OF REAL EARNINGS MANAGEMENT ON INVESTMENT EFFICIENCY IN THE NASDAQ BALTIC LISTED COMPANIES

Abstract

The aim of this study is to reveal the impact of real earnings management on the investment efficiency in Baltic joint-stock companies. The empirical study used data from companies listed on the Nasdaq Baltic Stock Exchange for the period 2010–2023. In order to investigate the impact of real earnings management on the investment efficiency, multiple panel regression was used, applying a fixed-effects model, and F, Breusch–Pagan and Hausman tests were performed. The results of the study revealed that there is a statistically significant negative relationship between real earnings management and the investment efficiency in companies listed on the Baltic Stock Exchange. This means that the more companies manage real earnings, the lower the efficiency of investment decisions is. Larger companies tend to make more efficient investment decisions, while the investment decisions of older companies and companies generating higher cash flows are less efficient. This empirical study may be useful for investors, regulatory authorities and policymakers. It complements the currently scarce research on the impact of real earnings management on investment efficiency, provides insights for listed companies in the Baltics on how to improve investment decisions.