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Evidence on the Trade-Off between Real Activities Manipulation and Accrual-Based Earnings Management

The Accounting review, 2012, Vol.87 (2), p.675-703 [Peer Reviewed Journal]

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Title:
Evidence on the Trade-Off between Real Activities Manipulation and Accrual-Based Earnings Management
Author: Zang, Amy Y.
Subjects: Accounting ; Accounting methods ; Accrual basis accounting ; Analytical forecasting ; Business structures ; Coefficients ; Creative accounting ; Decision models ; Earnings ; Earnings forecasting ; Earnings management ; Economic choice ; Financial management ; Industry ; Managers ; Marginal tax rate ; Models ; Studies ; Tax audits ; Trade-off ; Tradeoff analysis
Is Part Of: The Accounting review, 2012, Vol.87 (2), p.675-703
Description: I study whether managers use real activities manipulation and accrual-based earnings management as substitutes in managing earnings. I find that managers trade off the two earnings management methods based on their relative costs and that managers adjust the level of accrual-based earnings management according to the level of real activities manipulation realized. Using an empirical model that incorporates the costs associated with the two earnings management methods and captures managers' sequential decisions, I document large-sample evidence consistent with managers using real activities manipulation and accrual-based earnings management as substitutes.
Publisher: Sarasota: American Accounting Association
Language: English
Identifier: ISSN: 0001-4826
EISSN: 1558-7967
DOI: 10.2308/accr-10196
CODEN: ACRVAS
Source: ProQuest Central

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