Earning management practice in the tourism sector: An econometric approach

Tourism is a significant engine for economic growth, and the hotel industry (or accommodation sector) is assumed to be one of the most important sub-sectors of the tourism industry. The purpose is to investigate what factors influence the earnings management practice in this sector through an empirical analysis of a large dataset of 6075 observations related to 675 Italian firms in the period from 2015 to 2023. A new econometric model is proposed to estimate discretionary accruals (used to represent earning management), and a logit model is applied to identify firm- level characteristics potentially associated with them. Differently from previous contributions, results emphasize the crucial role of cash flow in determining discretionary accruals in the Italian sector. Moreover, the spatial distribution of the earnings management practice by Province is also evaluated during three different time periods: the pre-pandemic period (2015-2019), the pandemic period (2020-2021), and the post-pandemic period (2022-2023). For comparative purposes, the well-established Jones model is also applied to the selected dataset to prove that both models produce consistent results