The Influence of Earnings Management on Firm Value: Evidence from Non-Financial Firms in Emerging Markets

Abstract

Earnings management is a prevalent practice in corporate finance, influencing firm value and investor perceptions. This study examines the impact of earnings management on the firm value of non-financial firms listed on the Pakistan Stock Exchange (PSX). Using a panel dataset over six years, this research applies panel data regression techniques to assess the relationship between discretionary accruals and firm valuation metrics such as Tobin’s Q, earnings per share (EPS), and market capitalization. The findings suggest that earnings management positively influences firm value in the short run but leads to value deterioration over time. This study contributes to the existing literature by providing empirical evidence from an emerging market context and emphasizing the role of regulatory frameworks in mitigating earnings manipulation.