Earnings management in public sector, hybrid and non-profit organisations

Guest editor(s)

Pierre Donatella


Marco Bisogno


Sandra Cohen


Odd J. Stalebrink

Submission Deadline Extended: 31st May 2023

Background to the special issue 

Earnings management (EM) is considered a common practice in the private sector, and numerous studies have been published to investigate this topic. More recently, EM has also been attracting the interest of scholars, conducting research in public sector contexts. A recent literature review (Bisogno and Donatella, 2021) indicates that there has been an increasing trend in EM publications in this context over the past decade. This body of research deals with EM in relation to national governments (e.g., von Hagen and Wolff, 2006), sub-national governments (e.g., Stalebrink, 2007; Clémenceau and Soguel, 2017; Beck, 2018; Cohen et al., 2019), entities operating within national or sub-national governments such as healthcare organisations (e.g., Greenwood et al., 2017; Ibrahim et al., 2019; Anagnostopoulou and Stavropoulou, 2021), universities,  state-owned enterprises and other hybrid organisations (e.g., Ding et al., 2007; Wang and Yung, 2011; Capalbo et al., 2021). Furthermore, the topic has also garnered interest among scholars that study non-profit organisations (e.g., Heese, 2018; Nguyen and Soobaroyen, 2019). 


Thus far, the development of the topic has proceeded through two stages (Bisogno and Donatella, 2021). The first stage was characterised by the need to understand whether EM practices exist in these entities by using models built around various proxies for EM. Mainly focused on discretionary accruals, these models are based on studies conducted on private sector firms (e.g., Ferreira et al., 2013). Several of the studies are also explicitly developed to account for public sector specificities and context particularities (e.g., Beck, 2018). A second stage of research, reflected in more recent papers, investigates the motivations for EM practices and factors that could stimulate or mitigate EM behaviour (e.g., Anagnostopoulou and Stavropoulou, 2021; Cohen and Malkogianni, 2021; Stalebrink and Donatella, 2021). The standard research approach employed in the extant literature is to rely on economic theories and single country research designs. However, it is still common that no explicit theory is applied (Bisogno and Donatella, 2021). There are several potential venues available to further advance this incipient second stage. 


The above findings in combination with the increasing adoption of accrual accounting in the public sector elevates the need for studying the quality of accounting information and therefore the study of EM as it relates to public sector organisations. The provision of timely and reliable accounting information is a core element of public sector transparency. Because EM can affect the quality of accounting information, it represents a direct threat to transparency. This body of research can add to the understanding of the type of motives and conditions that contribute to EM behaviours and impair the production of reliable accounting data. As such, individuals working in or with national and sub-national governments or supranational organisations, who use accounting information for control purposes or for their decision making, are likely to have an interest in this topic. The topic should also be of interest to standard setters, accountants, auditors, rating agencies and financial institutions. 


Topics for Submission 

The aim of this special issue is to shed further light on EM motivations and EM’s impact on decision-making and transparency. We encourage the submission of papers that employ a comparative research approach and that consider the role of different administrative traditions, accounting systems, auditing and oversight systems, political and election systems, and other potential factors that may either stimulate or hinder the use of EM practices among politicians and managers. We also encourage new and novel approaches in terms of theory and method, to advance empirical research further. Much of the current literature do not explicitly use theory to guide the analyses. In terms of method, the vast majority of the current literature is quantitative, with emphasis placed on EM metrics originally developed and used in the private sector context. At this stage, theory and method development papers would be valuable to support the advancement of EM research. Accordingly, the special issue welcomes research that adds knowledge and deepens the understanding of EM from different perspectives, capturing both macro- and micro-level studies. This includes but may not be limited to the following topics: 

  • Method development contributions to models and methods that estimate EM in public or non-profit contexts.  
  • The application of novel theoretical perspectives to explain EM. 
  • Enhancing the understanding of the motivations behind EM practices in public, non-profit and hybrid organisations by exploring: 
    • What is the role of administrative traditions in EM? 
    • Does the magnitude of EM depend on the accounting bases in use (e.g., modified accrual vs. full accrual)? 
    • How is EM related to politics and elections? 
    • How do regulations approved by higher levels of governments affect EM practices? 
    • Does compliance with regulations approved by international organisations (such as the EU, IMF, World Bank) affect EM practices? 
    • How do performance measurement systems and entities’ financial health affect EM? 
    • Do alternative accounting treatments allowed by accounting standards impact EM behaviour? 
  • What is the role of auditing and oversight systems in curbing EM? 
  • Would accounting standards be related to EM (e.g. IPSAS compared to national public sector accounting standards)?  
  • How does auditing quality affect EM? 
  • What is the impact of EM practices? 
    • Do EM practices affect financial sustainability in the context of public sector and non-profit entities? 
    • Do EM practices affect intergenerational equity? 


How to Submit 

The guest editors will run an online workshop on 3ed of November 2022, where authors will be given an opportunity to present and get feedback on their research. Deadline for submission to the workshop is 5th of October 2022. More information about the workshop is available here: https://www.gu.se/en/event/on-line-workshop-on-earnings-management-in-public-sector-entities-hybrid-and-non-profit-organisations


The deadline for submissions to the special issue is 31 May 2023. Accepted papers will be published in a special issue in 2024. 


Submissions to the Journal of Public Budgeting, Accounting & Financial Management are made using ScholarOne Manuscripts, the online submission and peer review system. Registration and access are available at mc.manuscriptcentral.com/jpbafm. Please prepare your manuscript according to the journal’s authors’ guidelines which can be viewed at: emeraldgrouppublishing.com/products/journals/author_guidelines.htm?id=jpbafm


Contact details:

For inquiries and further information please contact the corresponding Guest Editor Dr. Pierre Donatella (University of Gothenburg, Sweden) – [email protected].  



Anagnostopoulou, S.C. and Stavropoulou, C. (2021), “Earnings management in public healthcare organizations: the case of the English NHS hospitals”, Public Money & Management, on-line first, pp. 1-10. https://doi.org/10.1080/09540962.2020.1866854  

Beck, A.W. (2018), “Opportunistic financial reporting around municipal bond issues”, Review of Accounting Studies, Vol. 23 No. 3, pp. 785-826. https://doi.org/10.1007/s11142-018-9454-2  

Bisogno, M. and Donatella, P. (2021), “Earnings management in public-sector organizations: a structured literature review”, Journal of Public Budgeting, Accounting & Financial Management, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JPBAFM-03-2021-0035  

Capalbo, F., Lupi, C., Smarra, M., and Sorrentino, M. (2021). Elections and earnings management: evidence from municipally-owned entities. Journal of Management and Governance, Vol. 25 No. 3, pp. 707-730. https://doi.org/10.1007/s10997-020-09523-z  

Clémenceau, M. and Soguel, N. (2017), “Does personal background influence a finance minister to cook the books? An investigation of creative accounting in Swiss cantons”, Applied economics, Vol. 49 No. 10, pp. 941-953. https://doi.org/10.1080/00036846.2016.1208360  

Cohen, S., Bisogno, M. and Malkogianni, I. (2019), “Earnings management in local governments: The role of political factors”, Journal of Applied Accounting Research, Vol. 20 No. 3, pp. 331-348. https://doi.org/10.1108/JAAR-10-2018-0162  

Cohen, S. and Malkogianni, I. (2021), “Sustainability measures and earnings management: Evidence from Greek Municipalities”, Journal of Public Budgeting, Accounting & Financial Management, on-line first, pp. 1-22. https://doi.org/10.1108/JPBAFM-10-2020-0171  

Ding, Y., Zhang, H. and Zhang, J. (2007), “Private vs state ownership and earnings management: Evidence from Chinese listed companies”, Corporate Governance: An International Review, Vol. 15 No. 2, pp. 223-238. https://doi.org/10.1111/j.1467-8683.2007.00556.x  

Ferreira, A., Carvalho, J. and Pinho, F. (2013), “Earnings management around zero: A motivation to local politician signalling competence”, Public Management Review, Vol. 15 No. 5, pp. 657-686. https://doi.org/10.1080/14719037.2012.707679  

Greenwood, M.J., Baylis, R.M. and Tao, L. (2017), “Regulatory incentives and financial reporting quality in public healthcare organisations”, Accounting and Business Research, Vol. 47 No. 7, pp. 831-855. https://doi.org/10.1080/00014788.2017.1343116  

Heese, J. (2018), “The role of overbilling in hospitals’ earnings management decisions”, European Accounting Review, Vol. 27 No. 5, pp. 875-900. https://doi.org/10.1080/09638180.2017.1383168  

Ibrahim, S., Noikokyris, E., Fabiano, G. and Favato, G. (2019), “Manipulation of profits in Italian publicly-funded healthcare trusts”, Public Money & Management, Vol. 39 No. 6, pp. 428-435. https://doi.org/10.1080/09540962.2019.1578539  

Nguyen, T. and Soobaroyen, T. (2019), “Earnings Management by Non‐profit Organisations: Evidence from UK Charities”, Australian Accounting Review, Vol. 29 No. 1, pp. 124-142. https://doi.org/10.1111/auar.12242  

Stalebrink, O.J. (2007), “An investigation of discretionary accruals and surplus‐deficit management: evidence from Swedish municipalities”, Financial Accountability & Management, Vol. 23 No. 4, pp. 441-458. https://doi.org/10.1111/j.1468-0408.2007.00437.x  

Stalebrink, O. J. and Donatella, P. (2021), “Public pension governance and opportunistic accounting choice: A politico-economic approach”, The American Review of Public Administration, Vol. 51 No. 3, pp. 227-245. https://doi.org/10.1177/0275074020954397  

von Hagen, J. and Wolff, G.B. (2006), “What do deficits tell us about debt? Empirical evidence on creative accounting with fiscal rules in the EU”, Journal of Banking & Finance, Vol. 30 No. 12, pp. 3259-3279. https://doi.org/10.1016/j.jbankfin.2006.05.011  

Wang, L. and Yung, K. (2011), “Do state enterprises manage earnings more than privately owned firms? The case of China”, Journal of Business Finance & Accounting, Vol. 38 No. 7‐8, pp. 794-812. https://doi.org/10.1111/j.1468-5957.2011.02254.x