“Earnings management and the effective tax rate”

The present investigation analyze the relationship between Earnings Management and the Effective Tax Rate. The specific objectives are related to the verification of how the relationship described above is influenced if the company have losses, if it is considered as a SME, if it is audited or, being audited, if it is audited by a BIG4. The present investigation is based on a sample of 244,893 observations from Portuguese unlisted domestic companies, for the period between 2014 and 2018. The results achieved allowed to find evidence of a positive relationship between the level of earnings management and the effective tax rate of the companies of the sample. The results also allowed to conclude that this relationship is intensified whenever this companies have losses and faded whenever they are SMEs. Additionally, whenever companies are audited, and if they audited are by a BIG4 company, the first relationship is also intensified