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This study examines the existence and prevalence of earnings management behaviour through Discretionary Accruals (DA). Using the modified Jones cross-sectional model to identify DA, firms listed in the COMPUSTAT database were classified into four groups based on their level of Pre-Discretionary Income (PDI): big-bath firms, loss avoidance firms, firms with small positive earnings and sugar-bowling firms. For big-bath firms and loss avoidance firms, the relationship between DA and PDI was found to be positive. Among firms with small positive earnings and sugar bowling, the relationship was negative.
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