Earnings Management as a Tool of Bankruptcy Prevention during Global Pandemic of COVID-19

Abstract

Research background: The Covid-19 pandemic affects all areas of operation in almost every country, except for Slovakia. In Slovakia, radical measures were taken in the first phase of March, and the state of emergency required the closure of gastronomic establishments, service operations, restrictions on shops, stricter hygiene measures and restrictions on free cross-border as well as a national movement. The second phase is foreseen in the autumn, which should be much more demanding, and it will also be a great challenge for companies to be able to adapt their activities to the new standards. An important question for companies is how this will affect their financial results. Some companies were not affected by the disease; others had to be closed, did not generate any profit, eventually went bankrupt.

Purpose of the article: The purpose of this article is primarily to examine the impact of coronavirus on earnings management and how it will affect further decision-making within the company. In our study, we focused on the impact that Covid-19 has or will have on the management of companies in Slovakia. A total of 172 companies in Slovakia operating in various sectors were interviewed

Methods: The methodology used standard questionnaire survey procedures with scale answers. We addressed companies, despite the sector in which they operate. The overall return was 20%, and we obtained 172 responses.

Findings & Value added: Because the consequences of the Covid-19 disease are not yet evident, managers within earning management will also count on reserves in the form of savings accounts more than before.