Correlation between Earnings Management and Financial Distress among Selected Firms in Kenya

Abstract

This paper evaluates the link between earnings management and financial distress among listed firms in Kenya. The assessment compares the modified Jones score, which is commonly used to measure discretionary accruals, with Altman’s Z score, which measures the degree of financial distress. The earnings management and financial distress. The selected firms under this study are known to be financially distressed as per the publicly available information. The hypothesis tests express whether a correlation exists between earnings management and financial distress. The result also highlights the level of significance of the effect of earnings management on financial distress.