COVID-19 Pandemic and Earnings Management: Evidence from Non-Financial Firms in Tanzania and Kenya.

This paper examines the impact of COVID-19 on accrual-based earnings management (AEM) in Kenya and Tanzania, two countries with similar economies but different pandemic responses. Using a panel data regression model on 43 non-financial firms listed on the Nairobi and Dar-es-Salaam Stock Exchanges, covering 344 firm-year observations, the study analyzed the relationship between a COVID-19 dummy variable and absolute discretionary accruals (Abs_[DAC]). The 2017-2019 period is defined as "pre-pandemic" and 2020-2022 as "pandemic." The results show an insignificant positive relationship between COVID-19 and Abs_[DAC] across the sample, indicating no statistically significant impact on AEM for both Kenyan and Tanzanian firms. However, a significant negative relationship was found for Kenyan firms, suggesting a reduction in AEM,likely due to stringent lockdowns and economic uncertainty. These findings provide insights for investors and policymakers on how pandemic-response policies influence financial reporting. Future research could explore alternative earnings management measures and account for differences in economic conditions and regulations.