Title:
Earnings Management and Stock Prices: An in-Depth Analysis

Authors:
Armaan Dedania

ABSTRACT:
This study investigates nuanced interactions between earnings management practices and their changeful effects on stock prices, offering fresh perspectives to the extant literature in this field. In light of corporate bodies’ use of earnings management, the manipulation of earnings has emerged as a phenomenon with justice to earn researchers’ attention, for the reason it delves into the impacts it bears on investors, market efficiency, and the practitioners of corporate governance. Being theoretically guided towards using case studies from history paired with the regulative investigation with a view to corporate governance, this study explores those patterns with multifaceted techniques. In summary, the introduction gives the context for the importance of earnings management in the finance world, how it influences investor perception and capital markets, its prevalence over time, and its impact on the role of corporate governance in capitalism. The discussion and hypotheses are successfully built on an extensive review of the available academic and empirical studies in the field. Particularly, the research paper covers the reasons and techniques for earnings management; identification methods, and their influence on shareholder wealth. The methodology section is very clear about the basic approach for the study and the requirements for data sources, empirical studies, and outcomes in terms of analysis techniques. These findings, based on rigorous scrutiny of historical facts and data on earnings management and stock performance, provide empirical support for certain aspects of theeing’ what the data are trying to tell us about how stock prices may react to specific earnings management practices. Case studies and statistical analysis allow us to understand what’s going on between these two poles more clearly. The discussion, in turn, places these findings in the context of prior literature and extrapolates to the wider implications of what’s going on for financial markets, investors, and regulators. In this way, a description of the existence of different practices of earnings management points to an ethically complex area of financial reporting, complicated by the countless interlocking and often nebulous views of what the data ‘tells’ us. Overall, these findings confirm the multi-faceted nature, and also the somewhat complicated nature of the effect of earnings management on stock prices. This paper contributes to the theory by delineating the complex and nuanced nature of the corporate financial reporting game, while also providing evidence to inform investors, regulators, and policymakers seeking to strengthen the integrity of capital markets. This paper recommends selective surveillance and smart regulation – to foster disclosure and preserve the underlying trust driving financial markets.