Earnings management and its determinants: closing gaps in empirical accounting research
In recent time a number of high-profile accounting scandals highlighted the problem of optimal allocation of savings to investment opportunities. To resolve this problem and to reduce damage caused to stakeholders of a company, it is important to understand the negative implications of earnings management and the conditions under which earnings management occurs. The study begins with the discussion of the earnings quality concept and the summary of prior evidence on the motivations for and the constraints of earnings management. The following empirical analyses shed some light on the effect of accounting standards and competing incentives on the level of earnings management.
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DETECTION OF EARNINGS MANAGEMENT
DETERMINANTS OF EARNINGS MANAGEMENT DECISIONS
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accounting accruals accounting choices accounting information Accounting Research accounting standards accrual accounting agement analysis behaviour capital accruals changes coefficient conservatism current period DeAngelo Dechow depreciation Descriptive statistics discretionary accruals discretionary component Distribution of earnings dummy variable earnings levels earnings management earnings quality concepts earnings response coefficients earnings smoothing empirical research expense extent of earnings financial reporting firm's flow from operations German GAAP hypothesis IAS/IFRS incentives income-decreasing information asymmetries interval investors Journal of Accounting lagged total assets Leuz level of earnings loan loss loss avoidance manage earnings managed upwards marginal tax rate measures motivations for earnings negative non-performing loans nondiscretionary accruals number of observations operating cash flows original Jones model performance predicted private firms public firms regression relevance of earnings reported earnings revenues sample scaled by lagged shareholders smooth earnings studies tax expense tax management tests time-series timeliness tion total accruals U.S. GAAP value relevance