Effects Of Earnings Management Strategy On Earnings Predictability

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Effects of Earnings Management Strategy on Earnings Predictability

Author : Leon Li (College teacher)
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (114 download)

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Book Synopsis Effects of Earnings Management Strategy on Earnings Predictability by : Leon Li (College teacher)

Download or read book Effects of Earnings Management Strategy on Earnings Predictability written by Leon Li (College teacher) and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "This study argues that the managerial choice of earnings management strategy maybe contingent upon a firm's information asymmetry and such a strategy affects the firm's earnings predictability. Measuring information asymmetry by earnings predictability based on the subsequent dispersion in analysts' forecasts and employing a quantile regression to analyze28,383 U.S. firm-year observations obtained from 1988 to 2014, this study reports that the effect of earnings management strategy on earnings predictability is non-uniform. Specifically,the amount of absolute discretionary accruals negatively (positively) relate to the subsequent dispersion in analysts' forecasts in the low (high) quantiles of the latter. These results support our hypothesis that a firm may implement efficient or opportunistic earnings management strategies according to the degree of information asymmetry between the firm's management and corporate outsiders. Keywords: Discretionary accruals, analysts' forecasts dispersion, quantile regression"--Page [ii].

Earnings Management. The Influence of Real and Accrual-Based Earnings Management on Earnings Quality

Author :
Publisher : GRIN Verlag
ISBN 13 : 3964875953
Total Pages : 81 pages
Book Rating : 4.9/5 (648 download)

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Book Synopsis Earnings Management. The Influence of Real and Accrual-Based Earnings Management on Earnings Quality by :

Download or read book Earnings Management. The Influence of Real and Accrual-Based Earnings Management on Earnings Quality written by and published by GRIN Verlag. This book was released on 2024-01-31 with total page 81 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master's Thesis from the year 2019 in the subject Business economics - Accounting and Taxes, University of Duisburg-Essen, course: Master Thesis, language: English, abstract: This paper delves into various theories and approaches, aiming to define and differentiate earnings management from related concepts such as fraud, expectation management, and impression management. It explores the goals and incentives driving earnings management, including maximizing or minimizing earnings, beating targets, and smoothing. At the onset of the new millennium, corporate scandals rocked the business world, eroding trust in management, boards of directors, and the accounting profession. In response, regulations and policies aimed at enhancing corporate governance and financial reporting were swiftly implemented. The credibility, clarity, and consistency of financial reporting practices play a pivotal role in enabling investors to make informed decisions. Accurate and fair financial performance representations, as opposed to inflated and misleading figures, are essential for market players, including shareholders and creditors. Investors rely on audited financial reports to guide their investment decisions, underscoring the critical importance of accuracy and reliability in publicly available financial disclosures. Auditors, by reducing the risk of material misstatement, ensure the integrity of the information disclosed in a company's financial statements. Management, with the goal of achieving promised targets and ensuring the company's existence, may engage in earnings management as a strategic contribution to corporate policy. Financial reporting serves as a means to distinguish well-performing companies from their counterparts, facilitating efficient resource allocation and empowering stakeholders to make effective decisions. The disclosed earnings results significantly impact a firm's overall business activities and management decisions, particularly in satisfying analysts' expectations, which can influence equity value. While accounting standards play a role, the quality of financial statements is more influenced by company-specific and institutional factors shaping managers' incentives. These factors lead to financial reporting practices being viewed as the outcome of a cost-benefit assessment.

Earnings Management

Author : Joshua Ronen
Publisher : Springer Science & Business Media
ISBN 13 : 0387257713
Total Pages : 587 pages
Book Rating : 4.3/5 (872 download)

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Book Synopsis Earnings Management by : Joshua Ronen

Download or read book Earnings Management written by Joshua Ronen and published by Springer Science & Business Media. This book was released on 2008-08-06 with total page 587 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?

Introduction to Earnings Management

Author : Malek El Diri
Publisher : Springer
ISBN 13 : 3319626868
Total Pages : 120 pages
Book Rating : 4.3/5 (196 download)

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Book Synopsis Introduction to Earnings Management by : Malek El Diri

Download or read book Introduction to Earnings Management written by Malek El Diri and published by Springer. This book was released on 2017-08-20 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides researchers and scholars with a comprehensive and up-to-date analysis of earnings management theory and literature. While it raises new questions for future research, the book can be also helpful to other parties who rely on financial reporting in making decisions like regulators, policy makers, shareholders, investors, and gatekeepers e.g., auditors and analysts. The book summarizes the existing literature and provides insight into new areas of research such as the differences between earnings management, fraud, earnings quality, impression management, and expectation management; the trade-off between earnings management activities; the special measures of earnings management; and the classification of earnings management motives based on a comprehensive theoretical framework.

Earnings Management

Author : Kathleen Yates
Publisher : Nova Science Publishers
ISBN 13 : 9781634855112
Total Pages : 0 pages
Book Rating : 4.8/5 (551 download)

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Book Synopsis Earnings Management by : Kathleen Yates

Download or read book Earnings Management written by Kathleen Yates and published by Nova Science Publishers. This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Earnings management is an issue that directly affects the overall integrity and quality of financial reporting and to date, many studies have been conducted in an attempt to gain an understanding of whether firms are engaging in earnings management, why they do so, what are the motives that drive managers' discretionary behaviour, what are the economic consequences and whether investors can see through this behaviour? In this book, Chapter One reviews the developments and the trends in the contemporary earnings management research and discuss several possible avenues for future research. Chapter Two provides an overview of the most recent studies on earnings management in relation to the financial crisis and the institutional environment and firm characteristics. Chapter Three provides a description of the nowadays most commonly used methods for measuring earnings management in accounting and finance literature. Chapter Four examines earnings management and corporate social responsibility as an entrenchment strategy.

Evidence on the Tradeoff Between Real Manipulation and Accrual Manipulation: to 25; Pages:26 to 50; Pages:51 to 75; Pages:76 to 100; Pages:101 to 120

Download Evidence on the Tradeoff Between Real Manipulation and Accrual Manipulation: to 25; Pages:26 to 50; Pages:51 to 75; Pages:76 to 100; Pages:101 to 120 PDF Online Free

Author : Amy Yunzhi Zang
Publisher : ProQuest
ISBN 13 : 9780549163251
Total Pages : 120 pages
Book Rating : 4.1/5 (632 download)

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Book Synopsis Evidence on the Tradeoff Between Real Manipulation and Accrual Manipulation: to 25; Pages:26 to 50; Pages:51 to 75; Pages:76 to 100; Pages:101 to 120 by : Amy Yunzhi Zang

Download or read book Evidence on the Tradeoff Between Real Manipulation and Accrual Manipulation: to 25; Pages:26 to 50; Pages:51 to 75; Pages:76 to 100; Pages:101 to 120 written by Amy Yunzhi Zang and published by ProQuest. This book was released on 2000 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt:

The Impact of Earnings Management on Bankruptcy Prediction Models

Author : David Veganzones
Publisher :
ISBN 13 :
Total Pages : 28 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis The Impact of Earnings Management on Bankruptcy Prediction Models by : David Veganzones

Download or read book The Impact of Earnings Management on Bankruptcy Prediction Models written by David Veganzones and published by . This book was released on 2017 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the impact of two types of earnings management, accruals and real activities manipulation, on bankruptcy prediction models. Consider that the form of engaging on earnings management might characterize firms' financial condition, we hypothesize and find that the special information extracted from earnings management models, which encompass potential manipulations, serves to improve the accuracy of bankruptcy prediction models. We further provide evidences that when potential accruals manipulation is measured, it allows an improvement of bankrupt firms, while real activities measures, especially sales manipulation, enhance the prediction improvement of non-bankrupt firms. Our finding suggests that failed firms are more likely to engage on accruals manipulation, while healthy firms do it on real activities manipulation. As a result, this study contributes to the literature by analyzing a novel explanatory variable, earnings management variable, to predict bankruptcy that can overcome financial alteration and can be applied to any type of firms.

Earnings Volatility and Earnings Predictability

Author : Ilia D. Dichev
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)

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Book Synopsis Earnings Volatility and Earnings Predictability by : Ilia D. Dichev

Download or read book Earnings Volatility and Earnings Predictability written by Ilia D. Dichev and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Survey evidence indicates widely held managerial beliefs that earnings volatility is negatively related to earnings predictability. In addition, existing research suggests that earnings volatility is determined by economic and accounting factors, and both of these factors reduce earnings predictability. We find that the consideration of earnings volatility brings substantial improvements in the prediction of both short and long-term earnings. Conditioning on volatility information also allows one to identify systematic errors in analyst forecasts, which implies that analysts do not fully understand the implications of earnings volatility for earnings predictability.

Management Control Systems

Author : Kenneth A. Merchant
Publisher : Pearson Education
ISBN 13 : 9780273708018
Total Pages : 876 pages
Book Rating : 4.7/5 (8 download)

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Book Synopsis Management Control Systems by : Kenneth A. Merchant

Download or read book Management Control Systems written by Kenneth A. Merchant and published by Pearson Education. This book was released on 2007 with total page 876 pages. Available in PDF, EPUB and Kindle. Book excerpt: With its unique range of case studies, real life examples and comprehensive coverage of the latest management control-related tools and techniques, Management Control Systems is the ideal guide to this complex and multidimensional subject for upper level undergraduates, postgraduates and practising professionals.

Earnings Management

Author : Jeff L. Payne
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Earnings Management by : Jeff L. Payne

Download or read book Earnings Management written by Jeff L. Payne and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the utilization of discretionary accruals to adjust reported earnings toward analysts' expectations regarding firm profitability. The variance in analysts' earnings forecasts is used as our firm specific measure for analysts' forecasts consensus. Our findings indicate that managers use discretionary accruals to achieve market expectations for earnings. Managers behave as though they have greater incentives to use income increasing discretionary accruals in settings where analysts have reached a consensus regarding firm earnings, particularly in settings where pre-discretionary accrual earnings are below analysts' expectations. When pre-discretionary accrual earnings are above analysts' expectations and analysts are not in consensus, managers use strategies to retain their ability to manage (increase) earnings in future periods by recording income decreasing discretionary accruals in the current period. Two alternative specifications to control for possible measurement error in our design produced results consistent with our primary analysis.

The Statistical Theory of Linear Systems

Author : E. J. Hannan
Publisher : SIAM
ISBN 13 : 1611972183
Total Pages : 418 pages
Book Rating : 4.6/5 (119 download)

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Book Synopsis The Statistical Theory of Linear Systems by : E. J. Hannan

Download or read book The Statistical Theory of Linear Systems written by E. J. Hannan and published by SIAM. This book was released on 2012-05-31 with total page 418 pages. Available in PDF, EPUB and Kindle. Book excerpt: Originally published: New York: Wiley, c1988.

Implications of the Integral Approach and Earnings Management for Alternate Annual Reporting Periods

Author : Katherine Gunny
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)

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Book Synopsis Implications of the Integral Approach and Earnings Management for Alternate Annual Reporting Periods by : Katherine Gunny

Download or read book Implications of the Integral Approach and Earnings Management for Alternate Annual Reporting Periods written by Katherine Gunny and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We compare earnings for the last twelve months ending in quarter four (i.e., fiscal year earnings), three, two and one. Prior literature offers two competing explanations for why fourth quarter earnings exhibit higher volatility than other interim quarters. Under the first explanation, GAAP assumes that quarterly earnings are an integral part of annual earnings and are used to settle up annual earnings. Any estimation errors in the preceding three quarters are corrected through fourth quarter earnings, which could make them more volatile. Under the second explanation, compensation and lending contracts based on fiscal year earnings lead to a concentration of earnings management in the fourth quarter and thus more volatile fourth quarter earnings. Although both explanations have similar predictions for the properties of quarterly earnings, our simulations show that these explanations, as suggested by Lipe and Bernard 2000, have distinct implications for the properties of annual earnings ending in quarter four, three, two and one. Overall, our results are more consistent with earnings management than settling up. In addition, we examine the relative earnings attributes and find that fiscal year earnings attributes rank lower on dimensions of accrual quality, persistence, predictability, and smoothness. Finally, we re-investigate the accrual anomaly and find that the accrual anomaly is more pronounced for fiscal year earnings.

The Impact of Earnings Management on the Predictive Ability of Accruals

Author : Chun-Chia (Amy) Chang
Publisher :
ISBN 13 :
Total Pages : 182 pages
Book Rating : 4.:/5 (259 download)

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Book Synopsis The Impact of Earnings Management on the Predictive Ability of Accruals by : Chun-Chia (Amy) Chang

Download or read book The Impact of Earnings Management on the Predictive Ability of Accruals written by Chun-Chia (Amy) Chang and published by . This book was released on 2006 with total page 182 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Earnings Quality

Author : Jennifer Francis
Publisher : Now Publishers Inc
ISBN 13 : 1601981147
Total Pages : 97 pages
Book Rating : 4.6/5 (19 download)

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Book Synopsis Earnings Quality by : Jennifer Francis

Download or read book Earnings Quality written by Jennifer Francis and published by Now Publishers Inc. This book was released on 2008 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting. Our reason for this choice stems from the view that the capital market uses of accounting information are fundamental, in the sense of providing a basis for other uses, such as stewardship. Because resource allocations are ex ante decisions while contracting/stewardship assessments are ex post evaluations of outcomes, evidence on whether, how and to what degree earnings quality influences capital market resource allocation decisions is fundamental to understanding why and how accounting matters to investors and others, including those charged with stewardship responsibilities. Demonstrating a link between earnings quality and, for example, the costs of equity and debt capital implies a basic economic role in capital allocation decisions for accounting information; this role has only recently been documented in the accounting literature. We focus on how the precision of financial information in capturing one or more underlying valuation-relevant constructs affects the assessment and use of that information by capital market participants. We emphasize that the choice of constructs to be measured is typically contextual. Our main focus is on the precision of earnings, which we view as a summary indicator of the overall quality of financial reporting. Our intent in discussing research that evaluates the capital market effects of earnings quality is both to stimulate further research in this area and to encourage research on related topics, including, for example, the role of earnings quality in contracting and stewardship.

Earnings Management Strategies and the Trade-Off Between Tax Benefits and Detection Risk

Author : Brad A. Badertscher
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)

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Book Synopsis Earnings Management Strategies and the Trade-Off Between Tax Benefits and Detection Risk by : Brad A. Badertscher

Download or read book Earnings Management Strategies and the Trade-Off Between Tax Benefits and Detection Risk written by Brad A. Badertscher and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior research has separately examined pretax earnings management activities that have current taxable income consequences (book-tax 'conforming earnings management') and those that do not have current taxable income consequences (book-tax 'nonconforming earnings management'). Our study documents the prevalence of, and then investigates the firm-specific characteristics that impact the choice between, these earnings management strategies. We utilize a sample of firms that restated their earnings downward due to accounting irregularities and thus can be presumed to have managed earnings upward. We find that nonconforming earnings management is more prevalent and that firms trade off the net present value of tax benefits against the net expected detection costs associated with nonconforming earnings management. In particular, firms having NOL carryforwards, using a high quality auditor, or engaging in the most egregious misstatements rely less on nonconforming earnings management strategies. We also find that book-tax differences are useful in predicting restatements.

A Simple Approach to Better Distinguish Real Earnings Manipulation from Strategy Changes

Author : Theodore E. Christensen
Publisher :
ISBN 13 :
Total Pages : 53 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis A Simple Approach to Better Distinguish Real Earnings Manipulation from Strategy Changes by : Theodore E. Christensen

Download or read book A Simple Approach to Better Distinguish Real Earnings Manipulation from Strategy Changes written by Theodore E. Christensen and published by . This book was released on 2020 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: Researchers typically infer real earnings management when a firm's operating and investing activities differ from industry norms. One significant problem with classifying deviations from industry averages as “earnings management” is that companies can change their operating and investing decisions for strategic reasons, and it is difficult to distinguish strategy adjustments from earnings management. We focus on opportunistic real earnings management, which we label “manipulation.” We use Principal Components Analysis (PCA) to develop real earnings manipulation (REM) measures that reflect the concurrent use of multiple activities. This approach is promising because, although there are many possible sources of abnormal activity levels aside from manipulation, there are fewer sources that can explain the combined, income-increasing use of these real activities. This simple approach results in REM metrics that (1) associate negatively with future operating performance, (2) reduce earnings persistence, (3) yield high-power tests, and (4) appear to capture “manipulation” reasonably well across most firm life-cycle stages. Importantly, this approach performs better than the standard real earnings management metrics across all dimensions. Also, because this innovation does not require a long time-series of data or rely on future period realizations for classification, it can be useful in more research settings than other recent innovations proposed in prior research.

Earnings Management, Chapter 11 Emergence and Firm Value

Author : Timothy C. G. Fisher
Publisher :
ISBN 13 :
Total Pages : 34 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Earnings Management, Chapter 11 Emergence and Firm Value by : Timothy C. G. Fisher

Download or read book Earnings Management, Chapter 11 Emergence and Firm Value written by Timothy C. G. Fisher and published by . This book was released on 2017 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the impact of earnings management prior to bankruptcy filing on the passage of firms through Chapter 11. Using data on 261 U.S. public firms, we construct three measures of earnings management, two of which are accounting (accrual) manipulation measures (discretionary accruals and abnormal working capital accruals) and one a real activities manipulation measure (abnormal operating cash flows). Our key findings are that earnings management prior to bankruptcy significantly reduces the likelihood of Chapter 11 plan confirmation and emergence from Chapter 11. The results are driven primarily by extreme values of earnings management, characterized by one or two standard deviations above or below the (zero) mean. The findings are consistent with creditors reacting positively to unduly conservative earnings reports and negatively to overly optimistic earnings reports. We find clear evidence that upward management of earnings destroys economic value by making the survival of the firm less likely, an effect that has not previously been uncovered by the literature. We also find that stressed firms are less likely to have their plans confirmed while the auditor choice (Big4 vs. non-Big4) positively affects the probability for plan confirmation as well as the likelihood of emergence from bankruptcy.