Firm-Size, Profitability, Leverage and Earnings Management of Indian Healthcare Companies
DOI:
https://doi.org/10.54741/MJAR/6.4.2026.327Keywords:
earnings management, modified jones model, firm size, profitability, leverage, indian healthcare firmsAbstract
This study examines the relationship between the firm size and earnings management in selected Indian Healthcare firms listed in BSE Healthcare Index. The firm size is measured using natural logarithm of total assets. Here, Discretionary Accruals (DACC) is used as a proxy for earnings management, along with absolute discretionary accruals (abs_DACC) to capture the magnitude of manipulation among Indian healthcare firms. The study uses a combination of descriptive statistics, correlation analysis along with panel data regression methods, including fixed and random-effects regression models with Hausman test (Hausman, J. A.,1978) to choose the appropriate model between them. The Hausman test indicates that the fixed-effects model is more appropriate for estimation.
ANOVA is used to investigate differences in earnings management across firms’ various sizes (Large-cap, mid-cap and small-cap firms). The results show that firm size has a significant negative relationship with earnings management (EM), implying that large healthcare enterprises indulge in lower levels of earnings management practices. Profitability indicates a positive association with earnings management. Leverage is found to be insignificant. The ANOVA results indicate that earnings management significantly differs across firm sizes, with small firms demonstrating highest level of earnings manipulation, implying larger firms are governed and scrutinized more closely which discourages opportunistic reporting practices.
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