What objectives do managers pursue when they manage the firms` earnings and how
investors react to observable earnings management? To address this issue, we examine
earnings management of firms using a sample of all firms with sufficient data
availability covering the period 1980 to 1997. Earnings can be thought of as a
combination of cash flows and adjustments. The stated purpose of these adjustments
is to better reflect 'true' economic performance in the earnings numbers. Managers,
however, have some discretion over the adjustments they make. They can, for
example, increase current earnings to either signal good future performance
(signaling), or to hide bad past performance (manipulation). Discretionary current
accruals (DCA) are used as a proxy for voluntary earnings management. The analyses
show that high DCA predict low future returns but are also associated with high
current and past returns. Additionally, DCA exhibit negative autocorrelation.
Overall, this is evidence that, at least, some firms manipulate their earnings
successfully.
게시판
공지사항
[2002년 제 2차] Why Do Firms Manage Earnings? Signaling vs. Manipul
작성자 : 관리자
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게시일 :
2003-07-12
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