Journal of Contemporary Issues in Business and Government

Abstract

This study focus on trade-off decision between earnings management strategies. For
this purpose AEM measured through the modified jones model (1991) and Kathoriet
al.,(2005)model and REM is captured through four measurements of Roychowdhury model
(2006). The sample is based on non-financial firms that are listed on PSX from 2007 to 2018 that
further divided and adopt those firms that suspects to enjoying EM incentives. For
analysispurpose we use panel data and our model is Zang (2012) model. The findingsapprove
that AEM have no switching relationship with any measurement of earnings management except
abnormal production cost. The unexpected REM measurement of production cost showsa
substitution effect. But, in this model also IFRS adoption does not play a role to control
switching choices between EM strategies. Overall, not all, but a few factors such as; firm status,
financial health of company and marginal tax rate show predicted directional relationship in
AEM models.