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Author: Naibuka Uluilakeba Saune
Publisher:
ISBN:
Category : Benchmarking (Management)
Languages : en
Pages : 328
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Book Description
Author: Naibuka Uluilakeba Saune
Publisher:
ISBN:
Category : Benchmarking (Management)
Languages : en
Pages : 328
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Book Description
Author: Brooke Beyer
Publisher:
ISBN:
Category :
Languages : en
Pages : 54
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Book Description
Prior studies document both an improvement and deterioration in the future operating performance of firms engaging in real earnings management (REM) to meet earnings benchmarks. These results suggest that some firms use REM to signal their favorable prospects, whereas others use REM opportunistically. We hypothesize that firms with less robust information environments, more costly REM, and fewer incentives to meet short-term earnings benchmarks are more likely to engage in REM to signal future performance. Consistent with expectations, we find the positive relation between REM and future profitability is limited to firms that have less robust information environments (measured with stock return volatility, bid/ask spread, and analysts following), more costly REM (measured with market share and financial health), and fewer incentives to meet short-term earnings benchmarks (measured with market-to-book ratio, transient investors, and seasoned equity offering). In supplementary analysis, we note that Bhojraj et al. (2009) restrict their sample to relatively large firms, whereas Gunny's (2010) sample includes both large and small firms. Our analysis indicates that the difference in sample composition explains the differing results. We find that small firms use REM to signal positive future performance, but large firms do not.
Author: Ahsan Habib
Publisher:
ISBN:
Category :
Languages : en
Pages : 31
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Abstract: This paper synthesises a new strand of earnings management research that uses distribution of reported earnings to detect earnings management instead of using discretionary accruals (DACCR), the conventional proxy for earnings management. The theoretical foundation for benchmark beating approach is derived from the 'prospect theory' developed by Kahneman and Tversky (1979) which shows that losses are more displeasing than the equivalent gain when evaluated from a particular reference point. Three such reference points are identified in the 'benchmark beating' literature, namely (i) avoiding losses; (ii) reporting small increase in earnings; and (iii) meeting or just beating analyst forecasts. Review of the empirical literature shows that there is an unusual discontinuity around zero for earnings level, earnings change and analyst forecasts than expected. Managers use available flexibilities under GAPP like deferred tax expense, tax expense, stock repurchase, restructuring charge reversals etc. to manage earnings for the purpose of achieving earnings thresholds. Research shows that stock-based compensation packages offered to managers is an important motivation for managers to engage in meeting or beating earnings thresholds. However, corporate governance mechanism like shareholder protection constrains managerial ability to meet or beat benchmark. Limitations of 'benchmark beating' literature for standard-setters are identified and some future research directions are provided.
Author: John (Xuefeng) Jiang
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Prior research documents that firms tend to beat three earnings benchmarks: zero earnings, last year's earnings, and analyst's forecasted earnings, and that there are both equity market and compensation-related benefits associated with beating these benchmarks. This study investigates whether and under what conditions beating these three earnings benchmarks reduces a firm's cost of debt. I use two proxies for a firm's cost of debt: credit ratings and initial bond yield spread. Results suggest that firms beating earnings benchmarks have a higher probability of rating upgrades and a smaller initial bond yield spread. Additional analyses indicate that (i) the benefits of beating earnings benchmarks are more pronounced for firms with high default risk; (ii) beating the zero earnings benchmark generally provides the biggest reward in terms of a lower cost of debt; and (iii) the reduction in the cost of debt is attenuated but does not disappear for firms beating benchmarks through earnings management. In sum, results suggest that there are benefits associated with beating earnings benchmarks in the debt market. These benefits vary by benchmark, firm default risk, and method utilized to beat the benchmark. Among other implications, this evidence suggests that the relative importance of specific benchmarks differs across the equity and bond markets.
Author: Joshua Ronen
Publisher: Springer Science & Business Media
ISBN: 0387257713
Category : Business & Economics
Languages : en
Pages : 587
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Book Description
This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?
Author: Jeffrey Coulton
Publisher:
ISBN:
Category :
Languages : en
Pages : 42
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Book Description
We investigate the extent to which the overvaluation hypothesis provides incentives for managers to beat earnings benchmarks, and whether this benchmark beating can be reliably interpreted as evidence of earnings management. We carefully identify firms immediately above earnings benchmarks that have, a priori, overvaluation-based incentives to achieve the benchmark. We therefore focus on benchmark-beating observations where manipulation is most likely, providing a more powerful test of the existence of opportunistic financial reporting. Consistent with overvaluation-related incentives encouraging earnings management, we find that overvalued firms that just exceed levels-related earnings benchmarks have higher unexpected accruals than firms with less extreme valuations.
Author: Fanghong Jiao
Publisher:
ISBN:
Category : Business forecasting
Languages : en
Pages : 117
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Book Description
Real earnings management (REM) has gained more attention due to its more extensive application than that before the enactment of Sarbanes-Oxley Act (SOX). Analysts' earnings forecast is an important benchmark for both the investors and the managers. Gunny (2010) finds that the signaling of future prospects overcomes the possibility of opportunism in firms that occasionally use REM to meet/closely beat benchmarks. However, the effect of repeatedly using REM to meet/beat earnings benchmarks has not been explored. This paper examines the long-term economic performance (Tobin's Q) of firms that utilize REM to habitually meet/closely beat analysts' earnings forecasts (HabitMBE). The results suggest that in equilibrium, while HabitMBE firms in general enjoy a market premium, HabitMBE firms that use REM repeatedly are penalized by investors, and the market premium disappears. Not surprisingly, I find that HabitMBE firms that have already used REM repeatedly try to curtail its use - a finding that is not found for occasional REM meeting/close beating firms. Another interesting finding of this study is that analysts' downward forecast revision in the long-run has a significantly negative effect on firms' economic performance, which prior studies have not clearly documented.
Author: Amy Yunzhi Zang
Publisher: ProQuest
ISBN: 9780549163251
Category :
Languages : en
Pages : 120
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Author: Thi Hong Nga Nguyen
Publisher: Springer Nature
ISBN: 9819984726
Category :
Languages : en
Pages : 655
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Book Description
Author: Wei Li
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 148
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