The frequency and magnitude of earnings management: Time-series and multi-threshold comparisons

Chen, Shaw K.; Lin, Bingxuan; Wang, Yaping; Wu, Leilei

doi:10.1016/j.iref.2010.02.005

Cited by 45 publications

(29 citation statements)

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“…Discontinuities in earnings distributions at benchmarks are characterized by an unusually large number of observations immediately above the benchmark and an unusually low number of observations immediately below the benchmark, consistent with the earnings management hypothesis that premanaged earnings below the benchmark are transformed into reported earnings above the benchmark. For examples and discussion of distinctive trough and peak discontinuities, see BD, Das and Zhang (), Degeorge, Patel, and Zeckhauser (), Chen, Lin, Wang, and Wu (), and Jacob and Jorgensen (). Also see Kerstein and Rai (), and Dhaliwal, Gleason, and Mills () for more direct evidence on actions that transform premanaged earnings below the benchmark into reported earnings above the benchmark.…”

Section: Theory and Characteristics Of Discontinuity Evidencementioning

confidence: 99%

What Have We Learned About Earnings Management? Integrating Discontinuity Evidence

Burgstahler

Chuk

2017

Contemporary Accting Res

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The accounting literature includes numerous examples of discontinuities at prominent benchmarks that are widely interpreted as evidence that earnings are managed to meet those benchmarks. However, there are a few examples where discontinuities do not exist, which are sometimes interpreted as inconsistent with earnings management. Alternative explanations for discontinuities have also been suggested. This paper reviews, evaluates, and integrates the available evidence and concludes that the theory that earnings are managed to meet benchmarks provides the simplest and most complete explanation for the body of discontinuity-related evidence.Qu'avons-nous appris au sujet de la gestion du r esultat? Int egration des el ements probants relatifs aux discontinuit es R ESUM ELa litt erature comptable regorge d'exemples de discontinuit es a des valeurs de r ef erence essentielles largement interpr et es comme attestant la gestion du r esultat de mani ere en vue de l'atteinte de ces valeurs. Il existe cependant quelques exemples de cas dans lesquels les discontinuit es sont inexistantes, situation que l'on juge parfois incompatible avec la gestion du r esultat. D'autres explications des discontinuit es ont aussi et e sugg er ees. Les auteurs etudient, evaluent et compilent les el ements probants disponibles et concluent que la th eorie selon laquelle le r esultat est g er e de mani ere a ce que les valeurs de r ef erence soient atteintes fournit l'explication la plus simple et la plus compl ete, en ce qui a trait a l'ensemble des el ements probants li es aux discontinuit es.* Accepted by Sudipta Basu. We appreciate helpful comments and suggestions on earlier drafts from Sudipta Basu, two anonymous referees, Ilia Dichev

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Section: Theory and Characteristics Of Discontinuity Evidencementioning

confidence: 99%

What Have We Learned About Earnings Management? Integrating Discontinuity Evidence

Burgstahler

Chuk

2017

Contemporary Accting Res

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“…Os presentes resultados corroboram com os achados de Leuz, Nanda, Wysocki (2003);Chang, Fang, Tseng (2007) (CHEN et al, 2010) ou "qualidade na divulgação dos lucros" (DECHOW; GE; SCHRAND, 2010), que são essenciais no cálculo dos accruals.…”

Section: Tabela 1 -Estatísticas Descritivas Para Os Dois Grupos Em Caunclassified

“…Uma vez que a principal variável que diferencia os dois grupos é seu nível de governança, então presume-se que a distinção das descontinuidades é decorrente da ausência ou presença dessa variável. Logo, tais achados apontam para o entendimento de que as descontinuidades realmente são evidências de EM, em concordância com estudos mais recentes sobre o tema (JACOB;JORGENSEN, 2007;CHEN;LI;WU, 2010;DONELSON;MCINNIS;MERGENTHALER, 2013).…”

Section: Tabela 1 -Estatísticas Descritivas Para Os Dois Grupos Em Caunclassified

As práticas de governança corporativa diminuem o gerenciamento de resultados? Evidências a partir da aversão na divulgação de prejuízos e de queda nos lucros

Piccoli

Souza

Silva

2014

R. Contemp. Contab.

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As práticas de governança corporativa diminuem o gerenciamento de resultados? Evidências a partir da aversão na divulgação de prejuízos e de queda nos lucrosDoes the governance practices reduce the earnings management? Evidences from aversion of earnings loses and decreases ¿Las prácticas de gobernanza corporativa disminuyen la administración de resultados? Evidencias a partir de la aversión en la divulgación de perjuicios y de baja en la ganancia Pedro Guilherme Ribeiro Piccoli ResumoO artigo avaliou se as práticas preconizadas pelo mais alto nível de governança da Bovespa reduzem o gerenciamento de resultados. Comparando-se o histograma dos resultados trimestrais divulgados pelas companhias pertencentes ao Novo Mercado com a distribuição dos resultados das demais empresas, conclui-se que a discricionariedade na divulgação de prejuízos e de quedas nos lucros é mais pronunciada nas empresas tradicionais, evidenciando que as práticas preconizadas por este nível de governança mitigam, mas não impedem esta discricionariedade. Concluiu-se também que este gerenciamento é mais empregado para evitar a divulgação de prejuízos do que para evitar a divulgação de queda nos lucros.Palavras-chave: Gerenciamento de resultados. Governança corporativa. Teoria da agência. Novo mercado. AbstractThe paper evaluated if the practices professed by the highest level of governance in São Paulo Stock Exchange, Brazil, reduces the earnings management. Comparing the histograms of the quarterly earnings of the companies belonging Novo Mercado with the distribution of earnings released by other companies, we conclude that the discretion for avoiding both earnings losses and decreases are more frequent to traditional companies, evidencing that the practices professed by this level of governance diminishes, but don't avoid this discretion. We also conclude that earnings management are more often employed for avoiding losses than for avoiding earnings decreases.Keywords: Earnings managemen. Corporate governance. Agency theory. Novo mercado. ResumenEl artículo ha evaluado si las prácticas preconizadas por el más alto nivel de gobernanza de Bovespa rebajan la administración de resultados. Comparándose el histograma de los resultados trimestrales divulgados por las compañías pertenecientes al Novo Mercado con la distribución de los resultados de las demás empresas, se concluye que la discrecionalidad en la divulgación de perjuicios y de rebajas de la ganancia es más acentuada en las empresas tradicionales, lo que evidencia que las prácticas preconizadas por este nivel de gobernanza mitigan, pero no impiden esta discrecionalidad. Se concluye también que esta administración es más utilizada para evitar la divulgación de perjuicios que para evitar la divulgación de rebaja en la ganancia.Palabras clave: Administración de resultados. Gobernanza corporativa. Teoría de la agencia. Novo mercado.

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“…Earnings management is measured from discretionary accruals as it has been shown that managers primarily use accounting accruals as tools for managing earnings. There are several motivations for earnings management and literature shows that one of the factors is managers' intent to meet or beat analyst forecasts (Brown & Caylor 2005;Chen, Lin, Wang & Wu 2010). This could be motivated by the markets' increasing expectations on reported earnings numbers to meet analysts' forecasts (Kasznik & McNichols 2002).…”

Section: Introductionmentioning

confidence: 99%

Analyst Forecast Accuracy and Earnings Management

Embong

Hosseini²

2018

AJAG

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This paper investigates the reciprocal or endogenous relationship between earnings management and analyst forecast accuracy. Earnings number is one of the most referred information especially in relation to investment decision-making. Financial analysts use earnings number and its trend in coming up with their forecast. The quality of earnings reported hence may affect the accuracy of forecast made by analysts. Quality of reported earnings is often indicated by earnings management. One of the motivations to manage earnings is to meet or beat analyst forecasts. If analysts failed to account for earnings management, it is possible that earnings manipulation in the previous year may mislead analysts and affect forecast accuracy for current and/or future years. Thus, relationship between earnings management and forecast accuracy could be endogenous or reciprocal, where managers react upon analysts' forecasts and analysts use reported earnings to make forecast. Previous research on this area assume earnings management and forecast accuracy as exogenous variables. This study on the other hand incorporates the reciprocal relationship between analyst forecast accuracy and earnings management in examining whether analysts can detect earnings management. The relationship between earnings management and analyst forecast accuracy of 110 firms listed on Main board of Bursa Malaysia from 2007 to 2012 is analyzed using dynamic panel system Generalized Method of Moments (GMM) estimator. The year 2007 to 2012 is chosen because this represents the period of convergence from MASB to MFRS. Result indicates that meeting or beating the forecast is one of the incentives for earnings management although not a strong incentive. On the other hand, earnings management significantly influence forecast accuracy, indicating that somehow, analysts trust the reported earnings. This study adds to the literature by addressing the possible endogenous and dynamic relationship between earnings management and analyst forecast accuracy.

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The frequency and magnitude of earnings management: Time-series and multi-threshold comparisons

Cited by 45 publications

References 41 publications

What Have We Learned About Earnings Management? Integrating Discontinuity Evidence

What Have We Learned About Earnings Management? Integrating Discontinuity Evidence

As práticas de governança corporativa diminuem o gerenciamento de resultados? Evidências a partir da aversão na divulgação de prejuízos e de queda nos lucros

Analyst Forecast Accuracy and Earnings Management

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