Investigating impacts of implementing earnings manipulation practices on stakeholders’ perception of earnings management: The case of Poland

Objective: The objective of the article is to investigate the impact of earnings manipulation on the perception of the earnings management phenomenon by financial specialists in public enterprises listed on the Main Market of the Warsaw Stock Exchange (WSE). Research Design & Methods: Empirical analyses were based on questionnaire research conducted among 124 finance specialists of listed companies. We used the Mann-Whitney U Test to compare the significance of differences in perceiving the earnings management phenomenon. Findings: The research proved statistically significant differences in the ethical perception of earnings manipulation between participants representing firms that implement and do not implement earnings management behaviours. Moreover, it allowed for gathering statistical evidence about the differences in the judgement of the possibility of detecting earnings-violating practices by statutory auditors in the eyes of diverse stakeholder groups. Furthermore, this study revealed significant differences between the respondents regarding the assertion that the auditor’s positive opinion on the financial report constitutes a guarantee for investors of the high-quality reported data. Implications & Recommendations: This study evidenced that participants who declared deploying earnings management in the companies they represent perceived the earnings management behaviour less rigorously and more liberally than individuals engaged in firms that did not manipulate earnings. Contribution & Value Added: The conducted research is an important contribution to the research gap and the foundation for future studies on the perception of earnings manipulation in the context of the Polish capital market.