Overvalued Equity, Benchmark Beating and Unexpected Accruals: Australian Evidence

Coulton, Jeff; Saune, Naibuka; Taylor, Stephen L.

doi:10.2139/ssrn.2141700

Cited by 4 publications

(2 citation statements)

References 14 publications

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“…Earnings manipulation activities are also documented by Abarbanell and Lehavy (), who demonstrate an empirical link between unexpected accruals and earnings surprises, which suggests accruals as a management tool to engage in earnings manipulation activities. Coulton et al () demonstrate similar use of accruals by management in Australia. Bartov et al () find that firms meeting or beating analyst earnings forecasts experience higher returns than firms which fall short of similar forecasts.…”

Section: Methodsmentioning

confidence: 93%

The Unintended Consequences of High Expectations and Pressure on New CEOs

Krieger¹,

Ang

2013

Business Fin & Account

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We provide empirical tests of a general version of targeting theory that greater scrutiny could lead to executive abuses. Our results show that new CEOs under higher expectations or pressure are more likely to report meeting analyst forecasts; however, this apparent superior performance dissipates after excluding firms having characteristics synonymous with earnings manipulation. We find evidence that new CEOs under greater pressure are considerably more likely to engage in manipulation while the link between expectations and manipulation is much weaker. The results are strongest for new CEOs whose firms report meeting forecasts and do not "walk down" earnings estimates.

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Section: Methodsmentioning

confidence: 93%

The Unintended Consequences of High Expectations and Pressure on New CEOs

Krieger¹,

Ang

2013

Business Fin & Account

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“…In contrast, Herbohn et al () document significant income‐increasing earnings manipulation in firms whose pre‐tax earnings were less than analysts’ consensus forecasts. Coulton et al () also find that overvalued Australian firms that just exceed earnings benchmarks have significantly larger discretionary accruals than firms with less extreme valuations, consistent with the opportunistic benchmark beating hypothesis. By presenting evidence of discontinuities in the distribution of current ratios, our study provides insights on managerial interventions on accounting items on the balance sheet, and examines the determinants and possible actions of such manipulation activities.…”

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confidence: 84%

Evidence of Avoiding Working Capital Deficits in Australia

Jiang¹,

Shan

et al. 2016

Australian Accounting Review

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This study examines the incidence of managerial interventions in Australian firms to avoid reporting working capital deficits. We document a significant discontinuity in the distribution of current ratios at 1.0. We also find that the propensity of Australian firms to avoid working capital deficits is largely determined by the costs and benefits of management interventions. Firms with short-term or long-term debt are less likely to engage in accounts manipulation, while firms paying dividends are more likely to do so. Further examination of the components of current assets and current liabilities reveals that, to avoid working capital deficits, Australian firms tend to undertake actions to overstate accounts receivable rather than overstate inventory or understate current liabilities. The results provide practical guidance and implications for shareholders, auditors and regulators in identifying accounting irregularities.

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Evidence of Avoiding Working Capital Deficits in Australia

Jiang¹,

Shan

et al. 2015

SSRN Journal

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Overvalued Equity, Benchmark Beating and Unexpected Accruals: Australian Evidence

Cited by 4 publications

References 14 publications

The Unintended Consequences of High Expectations and Pressure on New CEOs

The Unintended Consequences of High Expectations and Pressure on New CEOs

Evidence of Avoiding Working Capital Deficits in Australia

Evidence of Avoiding Working Capital Deficits in Australia

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