Does Earnings Management Reveal Firm Specific Information? A Study in the Indian Context

The study examines the relationship between earnings management and stock price synchronicity in the Indian context. This relationship has been examined by using panel data for 500 listed Indian manufacturing firms for the period 2009-2013. Modified Jones model and Roychowdhury model have been used to estimate the accrual-based and real earnings management respectively. Earnings management has been used as measure of opacity. Earnings management was found to be associated with higher stock price synchronicity, indicating less revelation of firm-specific information. Further, the whole sample of firms has been segregated into business group firms and standalone firms. We find that business group firms are more opaque, and reveal less firm-specific information than the standalone firms. The findings of our study contribute to the limited literature on stock price synchronicity and earnings management in the Indian context.