Effect of earnings management and cash holdings on annual report readability : evidence from top Indian companies

The present study explores the impact of earnings management on the readability of management discussion and analysis (MDA) section of annual reports of 384 Indian firms for 1,160 firm-years. It also explores the moderating behaviour of cash in explaining the association between earnings management and MDA readability. Using fixed-effect regression, the study finds that firms that manage earnings by meeting or just beating the previous year earnings publish complex MDAs. Moreover, it documents the positive moderating role of cash in explaining this relationship. Multiple robustness tests confirm our findings across different years including the COVID-19 crisis period.