Capital Market Pressures and Earnings Management PDF Download
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Author: Feng Chen
Publisher:
ISBN:
Category :
Languages : en
Pages : 150
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Author: Feng Chen
Publisher:
ISBN:
Category :
Languages : en
Pages : 150
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Author: Laura Arnedo Ajona
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
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Author: Anne Beyer
Publisher:
ISBN:
Category :
Languages : en
Pages : 45
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The paper studies a manager's optimal earnings forecasting strategy and optimal earnings management policy in a setting where both the mean and the variance of the distribution generating the firm's cash flows are unknown. The paper shows that the equilibrium price of the firm is a function of the manager's forecast, the firm's reported earnings, and the squared error in the manager's earnings forecast. The model in the paper contains several predictions, including: (i) the manager manipulates earnings to reduce his forecast error at the earnings announcement date; (ii) the firm's stock price is more sensitive to the firm's actual earnings announcement than to the manager's forecast; and (iii) controlling for the level of reported earnings and the magnitude of the earnings surprise, the firm's price is higher when it has a positive surprise at the earnings announcement date than when it has a negative surprise.
Author: Siew Hong Teoh, Ivo Welch, T.J. Wong
Publisher:
ISBN:
Category :
Languages : en
Pages : 43
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Author: Arturo Rodriguez Perales
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Author: Günter Strobl
Publisher:
ISBN:
Category :
Languages : en
Pages : 31
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The widespread use of accounting information by investors and financial analysts to help value stocks creates an incentive for managers to manipulate earnings in an attempt to influence short-term stock price performance. This paper examines the role of earnings management in affecting a firm's cost of capital. Using an agency model with multiple firms whose cash flows are correlated, we demonstrate that the extent of earnings manipulation varies across the business cycle. Managers are more inclined to engage in manipulation during periods of economic expansion. Because of this dependence on the state of the economy, earnings manipulation influences a firm's cost of capital despite the forces of diversification. In particular, we find that manipulation reduces the correlation between the firms' cash flows and thus lowers the risk premium required by investors.
Author: Eng Chuan Wu
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 188
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Author: Dennis J. Chambers
Publisher:
ISBN:
Category :
Languages : en
Pages : 50
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This study seeks to find evidence of misallocation of invested capital caused by opportunistic earnings management. Investors, if unable to detect the direction and magnitude of the managed portion of reported earnings, may tend to over-value firms practicing income-increasing earnings management and under-value firms practicing income-decreasing earnings management. I test this possibility by measuring future abnormal returns from a trading rule based on the magnitude of earnings management. Using five separate and distinct methodologies, I find consistent evidence of significant positive abnormal trading returns from a hedge portfolio based on the magnitude of earnings management. These results represent evidence of significant mis-pricing associated with opportunistic earnings management.
Author: Miró Fabrizio Emmanuele Feller
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Thomas R. Dyckman
Publisher: Prentice Hall
ISBN:
Category : Business & Economics
Languages : en
Pages : 152
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