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Earnings Management and Privatizations: Evidence from Pakistan

Iqbal, Abdullah, Khan, Iram A., Ahmad, Zeeshan (2015) Earnings Management and Privatizations: Evidence from Pakistan. The Pakistan Development Review, 54 (2). pp. 79-96. ISSN 0030-9729. (KAR id:23530)


This study examines the incidence of earnings management around the privatizations of State Owned Enterprises in Pakistan during 1991-2005. Using the modified Jones model and a sample of large privatizations (minimum US$1 million), it shows that the sampled firms experienced increase in earnings, decrease in cash flows, and increase in current discretionary accruals in the year prior to and/or in the year of privatization. The SOEs used both short term and long term accruals to inflate reported earnings. These accruals got reversed in the post-privatization period. These findings suggest that managers of the firms under privatization were engaged in earnings management to inflate their firms’ financial worth to maximize the privatization proceeds. Hence, we cannot reject the incidence of earnings management around privatizations in Pakistan. The results imply that the investors should carefully evaluate the to-be-privatized firms and keep in view the possibility of earnings management by the SOEs.

Item Type: Article
Uncontrolled keywords: Earnings management, privatizations, Pakistan, accruals, SOEs
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HJ Public Finance
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Funders: University of Kent (
Depositing User: Abdullah Iqbal
Date Deposited: 21 Dec 2009 11:18 UTC
Last Modified: 20 May 2023 18:57 UTC
Resource URI: (The current URI for this page, for reference purposes)

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