An Exploration of the Financial Economics Arena of Earnings Management through the Beneish M-Score Model to Assess Investment Risk in the Listed Cement Companies of Bangladesh

Abstract

This research investigates the interaction among financial economics, earnings management practices, and investor-focused risk assessment in cement companies listed on the Dhaka Stock Exchange (DSE). This paper concentrates on the audited financial reports of seven (07) cement companies in Bangladesh for the period 2020-2024. The cement industry is a significant sector in Bangladesh, providing vital elements for housing, urbanization, infrastructure development, and construction projects. This industry drives the nation's economic growth by boosting economic activity through job creation, attracting investment, and generating foreign exchange through exports. The Beneish M-Score model is initially used as a forensic accounting tool to evaluate whether there is any manipulation through eight corresponding independent variables. Furthermore, descriptive statistics, temporal analysis, and multivariate regression are allied to dependent variables such as liquidity, profitability, leverage, management efficiency, growth, and firm size. The results show that most companies are less likely to manipulate earnings. To support investors’ decision-making, this study highlights that a less likely earnings manipulator attracts more investors, and conversely, a more likely earnings manipulator attracts fewer investors. The outcomes complement the field of financial economics by reconnecting risk management to investment selections in a rising market. As the Beneish M-Score is a probabilistic approach, the empirical results of this study guide future research.