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Do managers reduce reported earnings before a workforce reduction announcement? Evidence from French listed firms

Comptabilité Contrôle Audit, 2016-12, Vol.22 (3), p.I-XXXV [Peer Reviewed Journal]

Copyright Association Francophone de Comptabilite Dec 2016 ;ISSN: 1262-2788 ;EISSN: 2313-514X

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  • Title:
    Do managers reduce reported earnings before a workforce reduction announcement? Evidence from French listed firms
  • Author: Verdier, Marie-Anne ; Boutant, Jennifer
  • Subjects: Accounting ; Costs ; Earnings management ; Employees ; Employment ; Hypotheses ; Labor law ; Layoffs ; Stockholders ; Workforce ; Works councils
  • Is Part Of: Comptabilité Contrôle Audit, 2016-12, Vol.22 (3), p.I-XXXV
  • Description: This paper examines whether firms engage in earnings management activities in the context of workforce reductions. We assume that firms use income-decreasing accruals before workforce reduction announcements to show that the operation is necessary and thus to avoid incurring political costs. Based on 120 workforce reduction announcements for 104 French listed companies over the period 20072012, our results confirm that firms manage earnings downwards in the year before workforce reduction announcements (approximately 4% of total assets). Overall, the results validate the political cost hypothesis in the context of workforce reductions.
  • Publisher: Paris: Association Francophone de Comptabilite
  • Language: English;French
  • Identifier: ISSN: 1262-2788
    EISSN: 2313-514X
  • Source: ProQuest Central
    Cairn.info Free Access Journals-Revues en accès libre
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