Abstract
The accounting literature is replete with studies on earnings management. In general, these studies suggest that managers mislead the market by manipulating the accrual component of earnings. A few studies, however, suggest that the presence of discretionary accruals does not necessarily imply such opportunistic behavior by managers. They argue that the presence of discretionary accruals is also consistent with managers using their reporting discretion to smooth earnings and signal their private information. Such use of discretion is referred to as efficient earnings management (EEM). This paper provides some insights on EEM by examining the moderating effect of growth opportunities on both the earnings return relationship (ERR), and the pricing of discretionary accruals by the Tunisian market. Our results show improved ERR and pricing of discretionary accruals in high-growth firms.
