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Improving the measures of real earnings management

Review of accounting studies, 2019-12, Vol.24 (4), p.1277-1316 [Peer Reviewed Journal]

The Author(s) 2019 ;Review of Accounting Studies is a copyright of Springer, (2019). All Rights Reserved. © 2019. This work is published under http://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 1380-6653 ;EISSN: 1573-7136 ;DOI: 10.1007/s11142-019-09505-z

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  • Title:
    Improving the measures of real earnings management
  • Author: Srivastava, Anup
  • Subjects: Accounting/Auditing ; Business and Management ; Competition ; Competitive advantage ; Corporate Finance ; Earnings ; Earnings management ; Public Finance ; Researchers
  • Is Part Of: Review of accounting studies, 2019-12, Vol.24 (4), p.1277-1316
  • Description: Firms often change their operating policy to meet a short-term financial reporting target. Accounting researchers call this opportunistic action real earnings management (REM). They measure REM by the difference between a firm’s costs and those reported by its industry peers. Firms that pursue distinct competitive strategies also display different cost patterns than peers. However, the models that measure REM do not control for differences in competitive strategy. Hence a researcher can misinterpret a cost difference that stems from a firm’s competitive strategy as REM. The researcher would also find a spurious correlation between earnings management and a firm characteristic that varies with competitive strategy. A cause or effect relationship with earnings management could be wrongfully inferred. I suggest improvements in measurement models to avoid misspecification.
  • Publisher: New York: Springer US
  • Language: English
  • Identifier: ISSN: 1380-6653
    EISSN: 1573-7136
    DOI: 10.1007/s11142-019-09505-z
  • Source: AUTh Library subscriptions: ProQuest Central
    Springer OA刊
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