Inflation Accounting, Earnings Management, And Reporting Quality: An Empirical Study on Bist 100 Companies

Abstract

Purpose – This study aims to examine the impact of the inflation accounting regulation, which was reintroduced in Türkiye as of 2023, on firms’ financial reporting indicators.
Design/methodology/approach – Using a panel dataset covering the period 2020–2024 for 83 firms listed on Borsa Istanbul (BIST100), the study analyzes the effects of inflation accounting on profitability indicators (EBIT, EBITDA, ROA), earnings management (TACC), and the alignment between cash flows and accounting earnings (CEAR). The analysis employs the Feasible Generalized Least Squares (FGLS) method and the fixed effects model estimated with clustered robust standard errors.
Results – The findings indicate that inflation accounting has positive and significant effects on EBIT and EBITDA, suggesting that the regulation plays a role in enhancing firms’ financial profitability levels. The results from the TACC model imply that inflation accounting may be used by managers as a tool for earnings management. On the other hand, the statistically insignificant effects on ROA and CEAR reveal that inflation accounting does not produce a noticeable impact on these indicators.
Discussion – When evaluated within the framework of Positive Accounting Theory, the findings suggest that managers may tend to shape financial reporting in line with their own objectives. The study provides a multidimensional insight into the effects of inflation accounting on firm behavior in the context of Türkiye and offers important implications for policymakers, standard setters, and financial statement users.