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Defence Contracting and Accrual-Based Earnings Management

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Calladoetal2026_A&F-Defence Contracting and Accrual‐Based Earnings Management.pdf(349.39 KB)
Date
2026-02-11
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Yagüe, JoséRepository logoRepository logoRepository logoRepository logoRepository logoRepository logo
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Authors
Callado Muñoz, Francisco José ; Sánchez Ballesta, Juan Pedro ; Utrero-González, Natalia ; Yagüe, José
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Economía Financiera y Contabilidad Organización de Empresas y Finanzas
DOI
https://doi.org/10.1111/acfi.70190
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info:eu-repo/semantics/article
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Abstract
We examine accrual-based earnings management in Spanish defence firms in 2011–2020, using a unique database from the Spanish Ministry of Defence. We find higher levels of accrual-based earnings management and lower accrual quality in firms where defence contracts represent a high proportion of their total sales. Defence contractors manage earnings upwards under financial constraints and downwards when profitability is high. These findings suggest that defence firms may strategically manage earnings to enhance financial image or reduce visibility. Distinguishing among current defence suppliers, potential suppliers, and nondefence firms, we show that earnings management occurs specifically in years with defence sales.
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Defence firms , Earnings management , Government contracts , Political costs , Customer concentration
Citation
Accounting & Finance, 2026; 0:1–21
URI
http://hdl.handle.net/10201/222822
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