Tax Pressure and Management of Accounting Income in Large Companies in Benin: The Role of the Financing Method

Abstract

This study investigates the influence of tax pressure on earnings management in large companies in Benin, with a focus on the mediating role of financing modes. In a context of ongoing fiscal reforms aimed at increasing government revenues, corporate tax pressure may induce opportunistic earnings management practices, particularly through discretionary accruals. Based on a sample of 78 large Beninese firms observed over the period 2018–2022 and using the Modified Jones model (Dechow et al., 1995), the study assesses the extent to which taxation affects earnings management and how debt versus equity financing alters this relationship. The findings indicate that tax pressure is a significant determinant of earnings management and that financing structure moderates this effect. Specifically, highly leveraged firms appear less prone to manipulate earnings, while equity-financed firms are more likely to engage in tax-driven adjustments. These results provide novel empirical evidence in the Beninese context and contribute to the literature on earnings management in emerging economies, with implications for both accounting regulation and tax policy design.

JEL Code: H26, M41, G32, O55

Paper type: Empirical Research