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The impact of COVID-19 on accrual-based earnings management: Evidence from South Africa

Asanda Mpumpula et al.

South African Journal of Economic and Management Sciences2026https://doi.org/10.4102/sajems.v29i1.6363article
AJG 1ABDC C
Weight
0.50

What the paper says

Background: The coronavirus disease 2019 (COVID-19) pandemic created a period of economic turbulence, affecting firms’ performance and providing management with incentives to change their earnings management behaviour. While research has been conducted on the COVID-19 pandemic and other crises in developed markets, evidence from emerging markets, particularly Africa, is limited. Sector-specific research is even more limited. Aim: This study investigated the COVID-19 pandemic’s impact on accruals-based earnings management (AEM) behaviour in South Africa. The study also investigates differences in sector-specific responses. Setting: This study’s population comprised all 333 Johannesburg Stock Exchange (JSE) firms from 2016 to 2022. Method: This study examined 159 JSE-listed firms across eight sectors from 2016 to 2022 using fixed-effects panel regressions. Absolute and signed discretionary accruals were examined to measure changes in the magnitude and direction of AEM. Results: Firms engaged in more income-decreasing AEM during the pandemic, consistent with ‘big bath’ behaviour as explained by agency and prospect theory. COVID-19’s impact on earnings management was asymmetric across sectors. Sectors facing more pronounced operational restrictions during the pandemic, such as consumer discretionary and basic materials, experienced shifts in earnings management behaviour, while less affected sectors showed no significant change. Conclusion: The findings indicate that AEM behaviour changed in South African listed firms, and that this change was not uniform across sectors. Contribution: Sector-specific testing during a unique natural experiment with asymmetric economic impacts across sectors provides a clearer lens to examine management’s behaviour. The findings can be used to enhance investor protection, leading to greater economic stability. Awareness and consideration of these results in decision-making and monitoring can improve the firm’s control environment, ensuring better capital allocation.

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https://doi.org/https://doi.org/10.4102/sajems.v29i1.6363

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@article{asanda2026,
  title        = {{The impact of COVID-19 on accrual-based earnings management: Evidence from South Africa}},
  author       = {Asanda Mpumpula et al.},
  journal      = {South African Journal of Economic and Management Sciences},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.4102/sajems.v29i1.6363},
}

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.