Measuring the Impact of Earnings Management and Operating Cash Flows on Stock Returns - An Empirical Study on Listed Firms in the Egyptian Stock Exchange

Purpose: The aim of this study is to get practical evidence from the Egyptian business environment about the impact of earnings management practices and operating cash flows on stock returns.
Design and Methodology: The study is based on the content analysis technique through examining the annual reports of a sample of (50) non-financial companies listed on the Egyptian Stock Exchange during the period (2015-2018) with a total of (200) respondents. To test the research hypotheses that reflect the relationship between earnings management practices and operating cash flows on stock returns, the study used regression analysis to test the study hypotheses.
Results and Recommendations: The results of the study indicate that there is a significant effect of operating cash flows on stock returns, while there is insignificant effect of earnings management on stock returns. Moreover, there is insignificant effect of earnings management practices and operating cash flows on stock returns in companies listed in the Egyptian stock exchange. Based on the previous results, the study recommends the necessity for directing the Egyptian companies towards taking into consideration all the factors and changes that affect the stock returns as well as increasing attention paid to them. They also need to adopt procedures and practices that reduce their repercussions on stock returns.
Practial Implications: The results of the study may be of interest to audit bodies and stakeholders because of the information it provides that may be useful in measuring the impact of earnings management practices and operating cash flows on stock returns in Egyptian business establishments.
Originality and Value: This study contributes to accounting literature by trying to reduce the debate related to earnings management practices and operating cash flows on stock returns, which may contribute to the interpretation and analysis of the discrepancy between the performances of stocks in different companies. It also provides additional evidence for interpreting that relationship in the Egyptian business environment as an example of economics of emerging countries.