“Are Georgian Private Sector Entities Engaged in Financial Information

Manipulation?”

Project objectives

The objective of this research project is to reveal whether Georgian private sector entities are intentionally engaged in financial information manipulation.

Project activities and outcomes

Accounting and finance literature have revealed that corporate managers are inclined to obfuscate firm performance in order to obtain some private benefits. While for the developed world the major reason for the manipulation of the financial information is the capital market/equity incentives, for the underdeveloped economies the focus often transposes towards tax authorities and thus firms are inclined to underestimate their financial performance in order to minimize income taxes. Under the EU harmonization process, Georgian private sector large entities are mandated to publish their audited financial statements starting from October 1, 2018. This framework provides an excellent opportunity to study whether those large private sector players are engaged in “playing” with their earnings in order to only moderately contribute to the state budget of Georgia. This work explores the phenomenon.

Project starting and finishing dates: 20.12.2017 – 19.12.2020

Coordinator University: Caucasus University, Georgia

Principal Investigator: Prof. Dr. Erekle Pirveli