The Impact of Earnings Management Practices on the Market Value of Industrial Companies Listed on the Amman Stock Exchange: Evidence from Jordan

Abstract

Reported earnings and their prediction is one of the most important factors that are relied upon in determining the value of various investments, given that the higher the earnings, the greater the possibility of distributing profits, and accordingly, stock prices are determined in the financial markets. This study aims to examine the impact of earnings management on the firm value of Jordanian industrial companies listed on the Amman Stock Exchange for 2015-2019. This study used discretionary accruals according to the modified Jones model to measure earnings management. Tobin’s Q as well is used as a proxy to firm value. Furthermore, this study used firm size, firm age, and leverage as control variables. In analyzing data, STATA is used. The results showed that earnings management has a negative but insignificant impact on firm value. On the other hand, leverage has a significant and negative effect on firm value. Firm age has a positive but insignificant effect on firm value. Firm size has a negative and significant effect on firm value.