Detection of the Relationship Between Firm Age and Discretionary Accrual Manipulation Practices: Evidence From BIST

This study examines the relationship between firm age and discretionary accrual manipulation in manufacturing firms listed on BIST (Borsa Istanbul) from 2013 to 2019. By applying stringent data selection criteria, the final sample includes 1,063 firm-year observations drawn from various manufacturing sub-sectors. Discretionary accruals, detected via the Dechow Model, serve as the study’s dependent variable. To ensure a comprehensive analysis, several control variables are incorporated: financial leverage, firm size, return on assets (ROA), and market-to-book ratio. These controls are essential to isolate the effect of firm age on accrual manipulation practices. Additionally, year-specific and sub-sector-specific dummy variables are utilized to account for temporal and industry-related variations that may impact the levels of discretionary accruals. The methodological framework employs a fixed-effect panel data multiple linear regression model. This choice is validated through the application of the Breusch-Pagan Lagrange Multiplier (LM) Test and the Hausman Test, which confirmed the fitness of the fixed-effects approach over alternative models. The empirical findings of the study reveal a significant inverse relationship between firm age and discretionary accrual manipulation. Specifically, the results suggest that older firms are less likely to engage in such practices, potentially due to their established reputations and more robust internal controls. Furthermore, the study finds that larger firms and firms those with higher performance metrics, as measured by return on assets, also exhibit significant impacts on income-increasing discretionary accrual manipulation. These insights contribute to the existing literature by highlighting the influence of firm age, size, and performance on earnings management practices within the manufacturing sector. The findings have practical implications for investors, regulators, and policymakers aiming to enhance the transparency and reliability of financial reporting. Keywords: Financial Accounting, Accrual Manipulation, Firm-Age