This study examines the role of Other Comprehensive Income in earnings management, specifically during declining profits. While extensive research has focused on traditional earnings management practices, the use of Other Comprehensive Income as a strategic tool remains underexplored. Analyzing data from 2,612 firms over 9,915 firm-years from 2016 to 2022, this study examines how changes in Other Comprehensive Income influence earnings management, utilizing Logit and Probit models. The findings reveal that firms with increasing Other Comprehensive Income are more likely to manage earnings, using this income to enhance their financial narratives during economic downturns. Further analysis shows a significant impact when Other Comprehensive Income combines accrual and real activities management, highlighting the complex association between various earnings management strategies. This research has important implications for investors, analysts and regulators, particularly in emerging markets, emphasizing the need for robust regulatory frameworks and transparent reporting to improve governance and promote ethical practices.
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