POLITICAL SCRUTINY AND EARNINGS MANAGEMENT IN THE OIL REFINING INDUSTRY

The fortunes of the oil refining industry have historically been tied to the political process. In periods of high gasoline prices public ou tcry increases pressure on the political process to increase regulatio n, taxation, and other costs on the industry. This study explores the relationship of gasoline prices and oil firm earnings with accounting earnings management of oil firms. Findings indicate that firms make ac counting changes and discretionary accruals to decrease (increase) ear nings in periods when gasoline prices and oil firm earnings are rising (falling).