Jaana Kettunen , Pasi Leppänen , Hannu Ojala , Jani Saastamoinen
{"title":"Earnings management in local government healthcare reporting: Financial distress vs. peer influence?","authors":"Jaana Kettunen , Pasi Leppänen , Hannu Ojala , Jani Saastamoinen","doi":"10.1016/j.bar.2024.101529","DOIUrl":null,"url":null,"abstract":"<div><div>This paper examines if financial distress and/or peer influence predict local governments' earnings management in the context of municipal healthcare expense reporting in Finland. Our statistical analyses use data hand-collected from all Finnish municipalities between 2016 and 2021. We document peer influence on earnings management by understating healthcare expenses in the public sector: Our results show that a municipality's decision to manage earnings upwards is positively associated with the healthcare district's central municipality's choice to understate its expenses. However, we do not find support for financial distress predicting earnings management. In our setting, peer influence appears to be a stronger motivation for financial reporting choice than municipality-specific characteristics.</div></div>","PeriodicalId":47996,"journal":{"name":"British Accounting Review","volume":"57 6","pages":"Article 101529"},"PeriodicalIF":9.4000,"publicationDate":"2025-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"British Accounting Review","FirstCategoryId":"91","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0890838924003093","RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
This paper examines if financial distress and/or peer influence predict local governments' earnings management in the context of municipal healthcare expense reporting in Finland. Our statistical analyses use data hand-collected from all Finnish municipalities between 2016 and 2021. We document peer influence on earnings management by understating healthcare expenses in the public sector: Our results show that a municipality's decision to manage earnings upwards is positively associated with the healthcare district's central municipality's choice to understate its expenses. However, we do not find support for financial distress predicting earnings management. In our setting, peer influence appears to be a stronger motivation for financial reporting choice than municipality-specific characteristics.
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The British Accounting Review*is pleased to publish original scholarly papers across the whole spectrum of accounting and finance. The journal is eclectic and pluralistic and contributions are welcomed across a wide range of research methodologies (e.g. analytical, archival, experimental, survey and qualitative case methods) and topics (e.g. financial accounting, management accounting, finance and financial management, auditing, public sector accounting, social and environmental accounting; accounting education and accounting history), evidence from UK and non-UK sources are equally acceptable.
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