The Impact of Covid-19 Pandemic on Accounting Information: US Evidence

This study examines whether the COVID-19 pandemic affected accounting information in the US. We compare discretionary accruals and the explanatory power of earnings between 2019 and 2020. We document a significant increase in discretionary accruals from 2019 to 2020, suggesting that firms managed earnings upwards to mitigate the shrinkage of earnings in the pandemic year. We also find that the explanatory power of earnings substantially declined from 2019 to 2020, consistent with the notion that the pandemic impaired the value relevance of earnings. This study explores the consequences of the pandemic from accounting perspective. It also enriches accounting research on economic crises.