GOVERNMENT GRANTS AND EARNINGS MANAGEMENT: AN ANALYSIS IN COMPANIES COMPONENTS OF THE IBRX100

Abstract

Government Grants are presented as important solutions for organizations, both public and private, as they translate into financial assistance conditioned to the performance of certain activities, directly impacting the accounting results. This research aimed to analyze the possible relationship between government grants and earnings management of companies that are part of the Brazil 100 Index (IBrX100) of [B]³. The sample consisted of 64 companies, from 2010 to 2018, totaling 576 observations. The level of Results Management (GR) was estimated through the residuals of the Pae model (2005). The Subsidy proxy was estimated using a dummy, in which a value of 1 was assumed for companies with a subsidy presence and 0 for companies that did not present a subsidy. The Market-to-book, Size and Leverage proxies were used as control variables, estimated by data in a balanced panel. The study considered that the level of compliance with the disclosure requirements of CPC 07 (R1) and the informational quality of the Explanatory Notes of the companies that received a subsidy is relatively low, highlighting the possibility of the agent acting opportunistically in the accounting scope, managing the results to meet your needs. Empirical evidence in the analyzed sample indicates that the presence of grants does not have a significant relationship in discretionary accruals, that is, it does not boost earnings management practices. However, the study encourages discussion on the subject, adapting assumptions of the Agency Theory, and emphasizing that low levels of disclosure on grants may be linked to opportunistic choices.