In line with the previous literature, a set of control variables is also included
in the regression to control for other firm-level factors which can influence
earnings management. Earlier studies have found that financial leverage is
positively related to earnings management, whereas political costs, captured by
firm’s size, also affect earnings management (Dechow, Sloan and Sweeney, 1995,
Warfield, Wild and Wild, 1995, Bartov, Gul and Tsui, 2000).