The Impact Of The Financial Press On Accrual Anomaly And Earnings Management

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The Impact of the Financial Press on Accrual Anomaly and Earnings Management

Author : Pyung Kyung Kang
Publisher :
ISBN 13 :
Total Pages : 92 pages
Book Rating : 4.:/5 (752 download)

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Book Synopsis The Impact of the Financial Press on Accrual Anomaly and Earnings Management by : Pyung Kyung Kang

Download or read book The Impact of the Financial Press on Accrual Anomaly and Earnings Management written by Pyung Kyung Kang and published by . This book was released on 2011 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of two essays investigating the impact of news released in the financial press on accrual anomaly and earnings management. Sloan (1996) shows earnings announcements to be information events driving the correction process of the mispricing of accruals. The first essay focuses on news released in the financial press as an additional driver of the correction process. Using 83,016 Wall Street Journal news articles from 1993 to 2006, I find that in addition to earnings announcements, news in the financial press also reveals valuable information for the correction of accruals mispricing. Prior studies have documented that the existence of information asymmetry between managers and shareholders creates an information environment conducive to earnings management. In the second essay, I investigate the impact of news coverage on earnings management by classifying news articles into two distinct types of news: earnings-related News (EN) and non-earnings-related news (NEN). Based on 48,972 news items reported in the Wall Street Journal and 32,177 firm-years for firms traded on the NYSE/AMEX/NASDAQ between 1994 and 2004 fiscal-years, I find that NEN is positively related to the degree of information asymmetry, whereas EN is negatively related. More importantly, I find that NEN, which increases information asymmetry, is positively associated with earnings management, while EN, which reduces information asymmetry, is negatively associated. The results also show that these associations of NEN and EN with earnings management are more profound for firms engaging in income-increasing earnings management and for large-size firms. This dissertation improves the understanding of the role of financial press as an information intermediary in capital markets.

The Accrual Anomaly

Author : Bernardine Mei Fong Low
Publisher :
ISBN 13 :
Total Pages : 234 pages
Book Rating : 4.E/5 ( download)

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Book Synopsis The Accrual Anomaly by : Bernardine Mei Fong Low

Download or read book The Accrual Anomaly written by Bernardine Mei Fong Low and published by . This book was released on 2004 with total page 234 pages. Available in PDF, EPUB and Kindle. Book excerpt:

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 Handbook of Equity Market Anomalies

Author : Leonard Zacks
Publisher : John Wiley & Sons
ISBN 13 : 1118127765
Total Pages : 352 pages
Book Rating : 4.1/5 (181 download)

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Book Synopsis The Handbook of Equity Market Anomalies by : Leonard Zacks

Download or read book The Handbook of Equity Market Anomalies written by Leonard Zacks and published by John Wiley & Sons. This book was released on 2011-08-24 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt: Investment pioneer Len Zacks presents the latest academic research on how to beat the market using equity anomalies The Handbook of Equity Market Anomalies organizes and summarizes research carried out by hundreds of finance and accounting professors over the last twenty years to identify and measure equity market inefficiencies and provides self-directed individual investors with a framework for incorporating the results of this research into their own investment processes. Edited by Len Zacks, CEO of Zacks Investment Research, and written by leading professors who have performed groundbreaking research on specific anomalies, this book succinctly summarizes the most important anomalies that savvy investors have used for decades to beat the market. Some of the anomalies addressed include the accrual anomaly, net stock anomalies, fundamental anomalies, estimate revisions, changes in and levels of broker recommendations, earnings-per-share surprises, insider trading, price momentum and technical analysis, value and size anomalies, and several seasonal anomalies. This reliable resource also provides insights on how to best use the various anomalies in both market neutral and in long investor portfolios. A treasure trove of investment research and wisdom, the book will save you literally thousands of hours by distilling the essence of twenty years of academic research into eleven clear chapters and providing the framework and conviction to develop market-beating strategies. Strips the academic jargon from the research and highlights the actual returns generated by the anomalies, and documented in the academic literature Provides a theoretical framework within which to understand the concepts of risk adjusted returns and market inefficiencies Anomalies are selected by Len Zacks, a pioneer in the field of investing As the founder of Zacks Investment Research, Len Zacks pioneered the concept of the earnings-per-share surprise in 1982 and developed the Zacks Rank, one of the first anomaly-based stock selection tools. Today, his firm manages U.S. equities for individual and institutional investors and provides investment software and investment data to all types of investors. Now, with his new book, he shows you what it takes to build a quant process to outperform an index based on academically documented market inefficiencies and anomalies.

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?

The Impact of Earnings Management on the Value-Relevance of Financial Statement Information

Author : Catherine Whelan
Publisher :
ISBN 13 :
Total Pages : 51 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis The Impact of Earnings Management on the Value-Relevance of Financial Statement Information by : Catherine Whelan

Download or read book The Impact of Earnings Management on the Value-Relevance of Financial Statement Information written by Catherine Whelan and published by . This book was released on 2004 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the relative value-relevance of both earnings and book value in the presence of three alternative sources of earnings management: short-term discretionary accruals, long-term discretionary accruals, and total discretionary accruals. For firm's whose discretionary accruals indicate earnings management, the value-relevance of earnings is expected to be lower than for firms without earnings management. Furthermore, in the presence of earnings management, it is expected that there will be a shift from a reliance on earnings to a reliance on book value in the valuation process. This would be reflected in a decrease in the value-relevance of earnings and an increase in the value-relevance of book value. Discretionary accruals are commonly used as a measure of earnings management. A contribution of this paper is the development of models to estimate short-term and long-term discretionary accruals. This enables investigation of differential effect on value-relevance of earnings management through the use of short-term versus long-term discretionary accruals. The results demonstrate that earnings management has an impact on value-relevance. Moreover, earnings management via long-term discretionary accruals has a greater impact on the value-relevance of earnings and book value than earnings management via short-term discretionary accruals.

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.

Implications of Nondiscretionary Accruals for Earnings Management and Market-based Research

Author : Patricia M. Dechow
Publisher :
ISBN 13 :
Total Pages : 92 pages
Book Rating : 4.:/5 (63 download)

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Book Synopsis Implications of Nondiscretionary Accruals for Earnings Management and Market-based Research by : Patricia M. Dechow

Download or read book Implications of Nondiscretionary Accruals for Earnings Management and Market-based Research written by Patricia M. Dechow and published by . This book was released on 1998 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Price-Based Investment Strategies

Author : Adam Zaremba
Publisher : Springer
ISBN 13 : 3319915304
Total Pages : 325 pages
Book Rating : 4.3/5 (199 download)

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Book Synopsis Price-Based Investment Strategies by : Adam Zaremba

Download or read book Price-Based Investment Strategies written by Adam Zaremba and published by Springer. This book was released on 2018-07-25 with total page 325 pages. Available in PDF, EPUB and Kindle. Book excerpt: This compelling book examines the price-based revolution in investing, showing how research over recent decades has reinvented technical analysis. The authors discuss the major groups of price-based strategies, considering their theoretical motivation, individual and combined implementation, and back-tested results when applied to investment across country stock markets. Containing a comprehensive sample of performance data, taken from 24 major developed markets around the world and ranging over the last 25 years, the authors construct practical portfolios and display their performance—ensuring the book is not only academically rigorous, but practically applicable too. This is a highly useful volume that will be of relevance to researchers and students working in the field of price-based investing, as well as individual investors, fund pickers, market analysts, fund managers, pension fund consultants, hedge fund portfolio managers, endowment chief investment officers, futures traders, and family office investors.

Earnings Accruals and Real Activities Management around Initial Public Offerings

Author : Peter Ising
Publisher : Springer Gabler
ISBN 13 : 9783658040963
Total Pages : 240 pages
Book Rating : 4.0/5 (49 download)

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Book Synopsis Earnings Accruals and Real Activities Management around Initial Public Offerings by : Peter Ising

Download or read book Earnings Accruals and Real Activities Management around Initial Public Offerings written by Peter Ising and published by Springer Gabler. This book was released on 2014-04-30 with total page 240 pages. Available in PDF, EPUB and Kindle. Book excerpt: The beginning of the new millennium was characterized by company scandals in accounting around the world. A transparent and fair presentation of financial statements is beneficial for capital market participants. Especially around initial public offerings different incentives of these players exist to influence financial statements in diverse aspects. Therefore, studies of earnings management try to identify abnormal behavior. This thesis covers additional aspects to shed light on substantial drivers of discretionary reporting behavior around going public. Factors like influence on real activities, industry affiliation, and specific years in the IPO process add further insight to this theoretical and practical topic. The dependence on these factors is high and confirm that company specifics are important for interpretation of results.

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.

Measuring the Pervasiveness of Earnings Management from Quarterly Accrual Volatility

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

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Book Synopsis Measuring the Pervasiveness of Earnings Management from Quarterly Accrual Volatility by : Zhaoyang Gu

Download or read book Measuring the Pervasiveness of Earnings Management from Quarterly Accrual Volatility written by Zhaoyang Gu and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Earnings management is a key issue for financial reporting. The purpose of this paper is to derive a set of indices to measure the pervasiveness of earnings management (PEM) using the properties of quarterly accrual volatility. The PEM index can be viewed as a quality measure of financial reporting and an effectiveness measure for financial monitoring. In contrast to mean-shifting studies in the literature, our measure based on accrual volatility yields two major advantages. First, it relieves us of the necessity of precise assumptions regarding economic events. Second, it provides a macro-perspective on the overall patterns in earnings management. The methodology based on accrual volatility can address issues like the earnings quality, the nature of the informational environment, and the effect of accounting standard setting. The seasonal pattern of accrual volatility can provide a trace of earnings management, even in the absence of further information about specific economic events and resulting managerial actions. Our working hypothesis is that pervasive earnings management leads to the first order stochastic dominance of fourth quarter accrual volatility over the other three quarters. We provide evidence on the relations between previously documented drivers of earnings management and seasonal accrual heteroskedasticity. These drivers include executive compensation, regulatory requirements, bond covenants, and political costs. This empirical support of our working hypothesis validates our application of Kolmogorov-Smirnov (KS) Distance to measure the pervasiveness of earnings management (PEM). We use raw total accruals as the basis for measuring PEM1 and use residuals from Jones? [1991] model to control for mechanical factors in our measurement of PEM2. The usefulness of controls is an empirical issue. Our results suggest that additional controls do not add much power to detect earnings management over and above the simplest measure based on total accruals. KS Distance is powerful in detecting the difference around the central locations of two distributions, but not powerful at the tail ends. We develop two other measures for PEM. First, we estimate the fraction of fourth quarter accruals volatility exceeding the 95th percentile value for the first three quarters (base period) distribution. This fraction, reduced by 5%, constitutes PEM3. Second, we design a simulation method to determine PEM4 as the percentage of firms with a given magnitude of accrual adjustment for the base period accrual volatility to match that of the fourth quarter. Both PEM3 and PEM4 are estimates of percentage of firms involved in earnings management of a given magnitude. However, we should note here that our PEM indices are more likely ordinal than cardinal measures. Though our methods of measuring PEM rely on indirect measurement, we provide direct evidence on the relevance of our method through a series of external validation checks. First, we use a subsample of firms subject to SEC actions relating to alleged earnings manipulation. This data was collected from Accounting and Auditing Enforcement Releases (AAER's) by the SEC. We compare PEM?s for the AAER sample to PEM?s for the COMPUSTAT sample to assess the power of our measures. The PEM indices for the AAER sample are two to three times as large as the PEM indices for the COMPUSTAT sample. Though we avoid interpreting the relative magnitudes literally, these differences do suggest a positive correlation between our PEM indices and the degree of earnings management. Second, we conduct case studies for 10 firms identified by fourth quarter accrual volatility as strongly suspect of earnings management. These studies show that suspect firms frequently engage in activities associated with earnings management, such as CEO turnover, restructuring, public offerings, or they experience losses. Applying our PEM indices to COMPUSTAT data, we find that pervasiveness of earnings management has been relatively stable in the period of 1988-1996.

Abnormal Accrual-Based Anomaly and Managers' Motivations to Record Abnormal Accruals

Author : Xia Chen
Publisher :
ISBN 13 :
Total Pages : 27 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Abnormal Accrual-Based Anomaly and Managers' Motivations to Record Abnormal Accruals by : Xia Chen

Download or read book Abnormal Accrual-Based Anomaly and Managers' Motivations to Record Abnormal Accruals written by Xia Chen and published by . This book was released on 2013 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior research (e.g., Xie 2001) documents that future stock returns are negatively correlated with abnormal accruals (referred to as the abnormal accrual-based anomaly), but the underlying reason is not clear. In this paper, we investigate the impacts of managers' motivations to record abnormal accruals on this anomaly. We hypothesize and find that the abnormal accrual-based anomaly is systematically associated with managers' motivations to record abnormal accruals. Future returns are negatively (positively) associated with abnormal accruals recorded for opportunistic earnings management (performance/signaling) purposes. These results suggest that investors' failure to detect managers' motivations to record abnormal accruals provides a potential explanation for the abnormal accrual-based anomaly. This failure provides managers with an opportunity to engage in opportunistic earnings management, and thus hinders managers' ability to communicate private information to the stock market via abnormal accruals.

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 Management Or Measurement Error? The Effect of External Financing on Unexpected Accruals

Author : Yaowen Shan
Publisher :
ISBN 13 :
Total Pages : 60 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Earnings Management Or Measurement Error? The Effect of External Financing on Unexpected Accruals by : Yaowen Shan

Download or read book Earnings Management Or Measurement Error? The Effect of External Financing on Unexpected Accruals written by Yaowen Shan and published by . This book was released on 2018 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: We demonstrate that managers' “normal” operating decisions associated with large (positive or negative) net external financing activities are likely to lead to significant measurement errors in unexpected accruals. The problem occurs pervasively in samples drawn from different time periods, samples that reflect a wide variety of alleged earnings management stimuli, as well as random samples. Simulation tests show that even at modest levels of net external financing changes, rejection frequencies for the null hypothesis of no earnings management rise dramatically. These results are robust to controls for performance and firm growth. Further analysis suggests that net debt financing is more likely to induce measurement error than equity financing. We find that the use of a matched-firm approach using industry and external financing matches is generally appropriate. These findings highlight the importance of controlling for the effect of external financing on unexpected accruals measures, and also have implications for research testing earnings management and financial reporting quality.

Stock Returns, Earnings Management, and Discretionary Accruals

Author : Brett D. Cotten
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (631 download)

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Book Synopsis Stock Returns, Earnings Management, and Discretionary Accruals by : Brett D. Cotten

Download or read book Stock Returns, Earnings Management, and Discretionary Accruals written by Brett D. Cotten and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Trends in Accrual Quality and Real Activity-based Earnings Management in the Pre and Post Sarbanes-Oxley Eras

Author : Nicholas Christopher Lynch
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (514 download)

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Book Synopsis Trends in Accrual Quality and Real Activity-based Earnings Management in the Pre and Post Sarbanes-Oxley Eras by : Nicholas Christopher Lynch

Download or read book Trends in Accrual Quality and Real Activity-based Earnings Management in the Pre and Post Sarbanes-Oxley Eras written by Nicholas Christopher Lynch and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: An increase in the prevalence of earnings restatements and cases of financial statement fraud in the early 21st century led to a significant loss of market capitalization and investor confidence in the attestation process. In an effort to restore such confidence, Congress passed the Sarbanes-Oxley Act (SOX) in July of 2002. The Act significantly increased the penalties for engaging in accrual activities aimed at either misleading users of the financial statements concerning the underlying economic condition of the firm or influencing contractual outcomes. As a result of the increased penalties for engaging in accrual activities, one would expect a relative shift from accrual activities to real activities to facilitate earnings management in the post-SOX period. As with most academic social disciplines, the test employed in my dissertation is a joint test of the sensitivity of the tools available to detect management activities, the research design, and the presence and strength of the effect for which I am searching. This dissertation is the first to test for changes in both accrual quality and real activity-based earnings management in the post-SOX period. The findings of the study empirically support a change in earnings management techniques in the post-SOX period compared to the pre-SOX period. Specifically, the quality of accruals incorporated into the accounting earnings figure have significantly increased in the post-SOX period. However, instances of earnings management using real activities have also significantly increased in the post-Sox period. These findings inform academics about the power of the tools used in academic accounting research and the overall quality of the argument. They inform users of financial statements about where to direct their attention in reading and evaluating the financials. Finally, they inform regulators, practitioners and policy makers of the effectiveness of the law at improving the quality of accruals, and bring to their attention a potential substitution in the techniques used to manage earnings.